Some “cautious optimism” is being seen in the Western European construction equipment market despite the latest data falling to 22% below the 10-year average, with a period of “restrained growth” forecast across the region for the next five years.
Data from Off-Highway Research has found that while the 10-year historical average level of sales in the region had been in the order of 142,000 units a year, the forecast this year suggested that nobody saw the industry getting back to that level in the next five years, with it struggling to around 125,000 units.
Off-Highway Research said that the market, unable to sustain the strong recovery of 2010 and 2011, posted declines of 4% in 2012 and 6% in 2013. It said that many suppliers believed the bottom had been reached in 2013, and “a cautious note of optimism was evident” during discussions held by Off-Highway Research with manufacturers and dealers in the compilation of its Annual Review.
It said it now appeared likely that future demand would undergo a period of restrained growth across the region for the next five years, settling at around 120,000 to 125,000 units per year.
There was a warning, however, that hopes of a more robust resurgence in demand would have to be tempered by several considerations, notably the disparate economic forecasts for several of the region’s markets, “which are doing little to bolster the confidence of potential equipment buyers”.
Off-Highway Research said, “Business confidence is absolutely fundamental to the long-term health of the industry, and political leaders will need to demonstrate that they can solve the economic challenges facing Europe before business confidence can be fully restored.
“Of equal concern to suppliers of construction equipment is the fact that there appears to be an increasing dearth of large infrastructure projects throughout much of the region or, perhaps more frustratingly, unwillingness on behalf of governments to sanction the requisite funds to implement them.”
The well-documented reasons for the current state of the market were cited as the continued economic uncertainty caused by the sovereign debt crises of many European countries, fears for the fate of the Eurozone itself, the subsequent fragility of the continent’s leading financial institutions, and the continued absence of credit.
It said that the unwillingness or inability of governments to embrace infrastructure investment as a catalyst for economic growth, depressed housing markets, and the resultant free fall in consumer and business confidence should be added to the list.
Market conditions in 2013 were further complicated by the severe and long lasting winter conditions in northern Europe during the early part of the year, it added. This resulted in the postponement or cancellation of construction projects.
Also, many contractors delayed investment decisions ahead of the launch of the latest Stage IIIB machines in 2014, as these products promised significant fuel cost savings over the equivalent outgoing models.
Developments within individual countries varied significantly last year. Off-Highway Research found that only four markets – Denmark, Ireland, Switzerland and the UK – experienced any measure of growth, while three markets – Austria, Norway and Spain – stayed at the previous year’s level.
The remaining eight markets all suffered declines of varying amounts, of which the largest in percentage terms were Netherlands (-19%), Portugal (-19%) and Belgium (-15%).
It said that it was significant that even in countries undergoing modest economic recovery and expanding construction activity, volumes continued to decline as contractors and rental companies delayed investment decisions until they saw evidence of a sustained improvement.