News Report: Surge in international contracts
By Chris Sleight04 November 2011
European contractors won € 171 billion (US$ 244 billion) worth of new contracts outside the national home markets last year, according to new statistics from European International Contractors (EIC), a trade association representing European construction companies working outside their national borders. This represented a +19.7% increase on the previous year's figure of € 143 billion (US$ 204 billion) and is the highest total ever recorded.
Asia & Oceania, along with Africa led the charge for new work, with growth close to +50%. There was strong support from other emerging markets, with the Middle East up +24.7% and Latin America up +20.8%.
In contrast, new international contracts in Europe were up just +3%, although this region was still the largest, with a value of
€ 65.1 billion (US$ 92.7 billion). New contract wins in the US and Canada were up +11.6% to € 22.4 billion (US$ 31.9 billion).
But while future prospects based on the new order intake look promising, the value of work done last year was flat compared to 2009 at € 141 billion (US$ 201 billion), and down just over -4% from the peak of € 147 billion (US$ 209 billion) seen in 2008. This reflects the fall in orders that was seen in 2009.
And although the value of work done last year was level with 2009, the figures hid a +31.6% increase from Asia and a +9.7% rise in Latin American activity. All other regions of the world saw the value of work done by European contractors fall last year, with the sharpest decline being the -11% fall in the Middle East.
Other European countries remain the biggest market for European contractors. Last year, the value of work carried out came to € 65.7 billion (US$ 93.6 billion) - down -1.9% from 2009, and some -14% below the peak value of € 76.2 billion (US$ 109 billion) seen in 2008.
It is interesting to note that the fall in cross-border work between 2008 and 2010 was about in line with contraction of the European market as a whole.
However, there were signs of improvement last year, with the value of orders taken rising +3% to € 65.1 billion (US$ 92.7 billion). Despite this rise, 2010 was the second year running that the value of new orders lagged behind the value of work done, which would tend to suggest a shrinking market.
The weakness of the European market has seen it fall in relative importance over the years. Although last year it still represented 46.5% of the work done by international European contractors, this proportion was 54.7% as recently as 2005.
The European market has grown in absolute value terms since then, but higher growth elsewhere in the world has diminished its relative importance. At 46.5%, the value of work carried out internationally in the region by other Europeans is the lowest it has been in the eight years that iC has data for.
For many years North America was the next biggest foreign market for European contractors, but 2010 saw it overtaken by Asia and Oceania for the first time. The value of work done in these largely emerging economies rose +31.6% to € 24.1 billion (US$ 34.3 billion), eclipsing the total of € 19.5 billion (US$ 27.8 billion) for the US and Canada.
A massive +47.8% rise in new contracts to € 35.9 billion
(US$ 51.1 billion) for Asia and Oceania last year means the importance of the region is likely to increase in coming years.
Indeed, with the value of new contracts last year running at 148%
of the value of work done, the indications are that there is a
high backlog in the region.
In contrast to the dynamism of Asia, the North American market continued to be flat for European contractors last year. Unlike all the other regions of the world, which grew sharply between 2003 and 2008 (and beyond in some cases), a € 22.4 billion (US$ 31.9 billion), the value of work carried out in North America and Canada by European contractors last year has hardly changed in the last eight years.
Although there was some growth from 2004 to 2006, the market has not shown any clear direction for the last four years. Rather it has been a case of up one year, down the next, with no overall net movement. With the rest of the world growing in the meantime, the relative importance of North America has declined. It represented just over a quarter of European contractors' foreign work in 2004, but last year the proportion was the lowest ever at 13.8%.
Besides Asia, Latin America also showed strong growth for European contractors last year. The value of work done was up +9.7% to € 6.3 billion (US$ 9 billion), while there was a third consecutive year of double-digit growth in new contracts, with a +20.8% rise to € 11.3 billion (US$ 16.1 billion).
Despite this strong growth, the region is still the smallest for European contractors, with the € 6.3 billion (US$ 9 billion) worth of work done last year representing just 4.9% of the total. However, with new contract wins in 2010 coming to 163% of the value of work done, there is clearly a high backlog of work to be done in Latin America.
In contrast to the relentless growth of Asia and Latin America, Africa and the Middle East were a mixed bag last year. Both regions saw a fall in the value of work done compared to 2009, although a surge in new orders suggests a recovery.
In Africa the value of work done fell -8.3% to € 13.1 billion (US$ 18.7 billion), however orders were up a massive +47.7% to € 20.3 billion (US$ 28.9 billion). As in Asia, this was a record for the value of work won. The previous high for Africa was an intake of € 15.2 billion (US$ 21.6 billion) in 2008.
In the Middle East meanwhile, the value of work done last year fell -11% to € 11.6 billion (US$ 16.5 billion). The up-tick in new contracts was not as spectacular as in Africa, with a +24.7% rise to € 15.5 billion (US$ 22.1 billion). This is about level with the volume of work won in 2008.
Emerging market growth
The surge in new orders from emerging markets last year saw the value of business won in these countries rise to its highest ever at € 83.7 billion (US$ 119 billion) - 49% of the total. It was the sixth year in a row that the proportion of new contracts won in these regions by Europeans has risen, and compares to just € 20.7 billion (US$ 29.5 billion), or 23.7% of the total in 2004.
In terms of work done, emerging markets accounted for 39.6% of the total last year, or € 56.1 billion (US$ 80 billion). It was the seventh consecutive year that the proportion and value of work carried out in emerging markets has risen for European contractors.
The value of work carried out by European contractors in emerging markets has grown +230% since the trough of 2003 - more than twice the rate of growth of total international output for these companies.
Given the weak order intake in Europe and North America last year, compared to the +40% rise in the value of work won in emerging markets, this swing looks set to continue, as the international contracting market as a whole returns to growth.