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Market and Business Development (MBD) carried out research on the European Construction Market Development between 1999 and 2003 and set out the following major conclusions in their subsequent report.
Market Review 1999 – 2003
During 2003, the EU construction market was in decline, albeit only marginally in nominal terms. This decline was believed to reflect the continued appreciation of the euro at the time, coupled with significant reductions in private investment during the previous two years of the review period. Furthermore, the decline was exacerbated by cuts in public expenditure during the preceding years.
As growth in GDP reduced across Europe towards the end of the review period, construction activity was also seen to decline, culminating in a 0.5% nominal reduction in 2003 to a projected market value of £608.4 billion.
The downturn in the EU construction output from 2002 marked the end of a period of relatively strong growth from a combination of economic stability and the boost the Millennium provided. The latter had a particular impact on public sector construction with several high values, prestigious structures that boosted output levels.
To some extent, the slowdown marked a return to more sustainable levels of output.
There is no doubt that both international and intra-regional economic conditions, combined with the effects of the unrest in the Middle East and the threat of international terrorism, also dampened output. The introduction of the single European currency unit had a particular influence on participating countries, as economic restrictions were put in place in terms of public sector borrowing.
Market Forecast 2004 – 2008
Growth in the European construction market was anticipated to be marginal in real terms during the forecast period. The market was expected to remain broadly static throughout the forecast period, with year-on-year increases of only 2% or less. This excludes the impact of the acceding member countries which was expected to increase overall output.
German Construction Market to Remain Largest in Europe
The German construction market was expected to remain the largest in Europe, albeit claiming a considerably lower proportion of the total European investment than in the early 1990s when the market was boosted by the positive effects of reunification in the country.
Conditions were expected to improve in all sectors of the market, with house building and civil engineering sectors, in particular, expected to grow during the subsequent years.
In the east of the country, a significant amount of housing repair and maintenance work was still required, with an expectation this would help to maintain steady, albeit modest, growth in the market. Germany was expected to account for 22% of the total European market throughout the forecast period.
French Construction Market to Maintain 15% Share of European Output
The French construction market was expected to maintain its 15% share of European output throughout the forecast period. Real term growth was anticipated to occur throughout the forecast period, although annual growth was likely to remain relatively low – between 1% and 2% during the period.
Italian Construction Market to Retain Market Share of Between 13% and 14%
The Italian construction market was expected to retain its 13–14% share of the total European output. During the preparation for the 2006 Winter Olympic Games in Turin, the country continued a program of improvements in infrastructure, to further benefit the country’s civil engineering sector, together with the strong emphasis on upgrading the motorway network.
UK Construction Market Expects Year-on-Year Growth
After the significant growth in the UK construction market at the turn of the century and during much of the review period, construction output was expected to show year-on-year real term growth throughout the forecast period.
In the early years of the forecast period, the UK anticipated real growth of just 1% until 2006, when the output was then expected to rise by 3% and slow towards the end of the period to just 2% in 2007 and 1% in 2008. This was based on an anticipated lack of new residential building work and a decline in civil engineering activity.
Spanish Construction Market Expected to Increase Market Share to 12%
The Spanish market was expected to increase its share of the European construction market to 12% and to maintain it during the whole of the forecast period. The Spanish economy was expected to remain relatively strong during the forecast period, with unemployment anticipated to fall towards the latter part of the forecast period.
At the time of the review, the Spanish construction industry had benefited from substantial increases in civil engineering investment and the level of spending on infrastructure – such as a major upgrade of the country’s motorway network, which was expected to continue through most of the forecast period.
Dutch Construction Market to Continue to Maintain Real Growth
The Dutch market for construction was expected to continue to maintain real growth in output during most of the forecast period, with annual growth expected to peak at 5% in real terms during 2006.
Belgian Construction Market to Demonstrate Moderate Growth in 2004 and 2005
The Belgian construction market was expected to demonstrate moderate growth in 2004 and 2005, with construction output value forecast to grow 3% and 6% during those years. The growth was mainly due to substantial increases in demand for non-residential and civil engineering investment.
However, subsequently, the Belgian market was not expected to perform as strongly as many within Europe, and a downturn in growth levels was expected to begin in 2006.
Swedish Construction Market Expects Sustained Real Growth
The Swedish construction market was expected to demonstrate sustained real growth during most of the forecast period, largely reflecting the full recovery that the country had made from the depths of the recession in the Swedish construction market during the early 1990s. However, growth in most sectors of the market was expected to remain relatively small, with the residential building sector expected to show the biggest advances.
Austrian Construction Market to Maintain 3% Share of Total European Market
Austria was expected to maintain a 3% share of the total European construction market during much of the forecast period, with the strongest real growth expected to be recorded during 2007. The Austrian industry was expected to benefit from the enlarged EU in 2004, with its geographical proximity to these markets expected to result in increased opportunities in the construction sector, particularly within the civil engineering market.
Danish Construction Market Forecast to Experience Stable Real Term Annual Growth
After a drop of 1% in 2003, the Danish construction market was forecast to regain the ground it had previously lost, and achieve a stable real term annual growth rate of between 1% and 4% throughout the forecast period. This reflected the improved economic conditions in Denmark, which would result in increased investment levels in both new housing and housing repair, and maintenance in particular.
Portuguese Construction Market Forecast to Fluctuate
The Portuguese construction market was expected to fluctuate somewhat during the forecast period, with the value of the sector expected to be further reduced during the early years. This was based on the substantial changes in annual investment in civil engineering and, in particular, in the civil engineering repair and maintenance work at the time.
This article was updated on 24th February, 2020.