European Construction Market Development Report

Topics Covered

Market Review 1999 – 2003
Market Forecast 2004 – 2008
German Construction Market to Remain Largest In Europe
French Construction Market to Maintain 15% Share of European Output
Italian Construction Market to Retain Market Share of Between 13% and 14%
UK Construction Market Expects Year-on-Year Growth
Dutch Construction Market to Continue to Maintain Real Growth
Belgian Construction Market to Demonstrate Moderate Growth in 2004 and 2005
Swedish Construction Market Expects Sustained Real Growth
Austrian Construction Market to Maintain 3% Share of Total European Market
Danish Construction Market Forecast to Experience Stable Real Term Annual Growth
Portugese Construction Market Forecast to Fluctuate

After researching the European Construction Market Development and taking into account various other factors, the following major conclusions can be drawn from the report by Market and Business Development (MBD).

Market Review 1999 – 2003

The EU construction market continued to decline, albeit only marginally in nominal terms during 2003. This decline is believed to reflect the continued appreciation of the euro, coupled with significant reductions in private investment during the last two years of the review period. Furthermore, the decline has been exacerbated by cuts in public expenditure during recent years. 

As growth in GDP was 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 a projected £608.40 billion. 

The downturn in the EU construction output since 2002 marked the end of a period of relatively strong growth on the back of a combination of economic stability and the boost that the Millennium had particularly on public sector construction with several high value, prestige structures boosting output levels. Thus, the slowdown to some extent marks a return to more sustainable levels of output, although 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, has also dampened output. Of particular significance has been the introduction of the single European currency unit which exerted on participating countries economic restrictions in terms of public sector borrowing.

Market Forecast 2004 – 2008

 Growth in the European construction market is anticipated to be marginal in real nominal terms during the forecast period. The market is expected to remain relatively 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 will inevitably increase overall output somewhat.

 German Construction Market to Remain Largest In Europe 

The German construction market is 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 are expected to improve in all sectors of the market, with house building and civil engineering sectors in particular anticipated to be revived during the next few years. In the east of the country, there is still a significant amount of housing repair and maintenance work to be done, which will help maintain steady, albeit modest growth in the market. Germany is expected to account for some 22% of the total European market throughout the forecast period.

French Construction Market to Maintain 15% Share of European Output 

The French construction market is expected to maintain its share of some 15% of European output throughout the forecast period. Real term growth is anticipated to occur throughout the forecast period, although annual growth is likely to remain relatively low at between 1% and 2% during the period.

Italian Construction Market to Retain Market Share of Between 13% and 14% 

The Italian construction market is expected to retain its share at between 13% and 14% of the total European output. Italy continues to prepare for the 2006 Winter Olympic Games in Turin, embarking on a programme of improvements in infrastructure, which will further benefit the country’s civil engineering sector, together with the strong emphasis of upgrading its motorway network.

UK Construction Market Expects Year-on-Year Growth

After the relatively substantial growth in the UK construction market at the turn of the century and during much of the review period, construction output is expected to demonstrate year-on-year real term growth throughout the forecast period. In the early years of the forecast period, the UK is forecast to register real growth of just 1% until 2006, when the output is expected to rise by 3%. This, however, is forecast to slow towards the end of the period to just 2% in 2007 and 1% in 2008, as a result of an anticipated sluggishness of the new residential building work and a decline in the civil engineering activity.

Spanish Construction Market Expected to Increase Market Share to 12% 

The Spanish market is 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 is expected to remain relatively strong during the forecast period, with unemployment anticipated to be reduced towards the latter part of the forecast period. The Spanish construction industry has benefited from the substantial increases in civil engineering investment during recent years and the level of spending on infrastructure work, such as a major upgrade of the country’s motorway network, is expected to continue through most of the forecast period.

Dutch Construction Market to Continue to Maintain Real Growth 

The Dutch market for construction is 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 is expected to demonstrate moderate growth in 2004 and 2005, with forecast 3% and 6% real growth in the value of construction output during those years respectively. The growth is mainly due to substantial increases in demand for non-residential and civil engineering investment. However, subsequently the Belgian market is not expected to perform as strongly as many within Europe, and a downturn in growth levels is expected to begin in 2006.

Swedish Construction Market Expects Sustained Real Growth 

The Swedish construction market is expected to demonstrate sustained real growth during most of the forecast period, largely reflecting the full recovery that the country has made from the depths of the recession felt in the Swedish construction market during the early years of the 1990s. However, growth in most sectors of the market is anticipated 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 is 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 is expected to benefit from the enlargement of the 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 is forecast to gain back its lost ground with a stable real term annual growth rate of between 1% and 4% throughout the forecast period. This is expected to reflect the improved economic conditions in Denmark, resulting in increased investment levels in both new housing and housing repair and maintenance in particular.

Portugese Construction Market Forecast to Fluctuate 

The Portuguese construction market is anticipated to fluctuate somewhat during the forecast period, with the value of the sector expected to be further reduced during the early part of the forecast period. The fluctuations are largely due to the substantial changes in the annual investment in civil engineering and in particular the civil engineering repair and maintenance work.

Source: Market & Business Development Ltd

             Press Release February 2004

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