European construction industry, complete recovery expected in 2023

According to the latest Euroconstruct forecast, the construction volume in Europe is estimated to have slumped by 7.8% in 2020, but should grow by 4.1% this year, as well as by 3.4% and 2.4% in 2022 and 2023.

The sudden and totally unexpected Covid-19 pandemic has dramatically changed the prospects for the construction market, opening up a new phase that has totally overturned all estimates.

According to the latest Euroconstruct forecast, presented in Munich during the 90^th conference held on 24 November last year, the construction volume in the area is estimated to have slumped by 7.8% in 2020. This marks the second upward revision after the -11.5% forecast in June was updated to -9.1% in August.

For 2021, the forecast is fairly similar to the August revision and amounts to 4.1% growth.

The outlook also remains positive for 2022 (+3.4%) and 2023 (+2.4%). Total construction output in the Euroconstruct area is expected to reach 1.73 trillion euros by 2023 and to exceed the 2019 level by 28 billion euros (+1.7%).

The consequences of the economic and health crisis for individual countries in 2020 vary significantly, ranging from small growth in Finland and stagnation in Portugal and Norway to a sharp decline of almost one fifth in the UK. Other heavyweights like France and Spain are also strongly affected, whereas the German market performed surprisingly well due to the fact that activities could continue relatively unhindered.

As for individual market segments, the civil engineering sector appears to be least affected by the pandemic. Expenditure on infrastructure fell by just 3.8% in 2020 and is expected to expand by 5.2% in 2021.

The negative 2020 trend in non-residential construction (-9.2%) will be followed by growth of +2.5% in the current year, although this will not be sufficient to return to 2019 levels.

Following the major losses in the residential segment (-8.6% in 2020), the market will regain significant momentum in 2021 with expected growth of 4.7%.

Due to the lockdowns imposed by numerous governments last spring, renovation projects were also brought to a halt, weakening renovation activities by 7.3%.

The assessment of the further development of construction activity in 2021 is based on the assumption that the economy in the Euroconstruct area will grow by 4.9% following the 8.0% contraction in 2020. The direct impact on the construction industry is expected to be much less severe than last spring as safety measures and digital working procedures should enable construction work to continue uninterruptedly.   

Overall, the uncertainties surrounding the evolution of the pandemic mean it is still not possible to make firm predictions for the coming months. Indirect negative effects of the pandemic, such as rising unemployment, falls in turnover and tax losses, will also have to be taken into account, but much will depend on how well the government relief and stimulus programmes work.

In this fragile and uncertain scenario, however, it seems plausible to assume that positive factors such as the need for housing in urban regions, energy renewal and modernisation of infrastructure will give the construction industry a fresh boost in the medium term.