Stagnation in the European building market

Apr 14, 2003

Stagnation in the European building market15/04/2003 - According to figures released by FIEC (European Construction Industry Federation), the value of construction activity in European Union countries in 2002 was 900 billion euro, 0.6% up on the previous year. Whereas in some countries activity continues to recover (+8.1% in value in the UK following large-scale investments in the public sector; +4.6% in Spain due to infrastructure investments), 2002 was a difficult year for Germany (-5.8% in 2002; -6.1% in 2001) with a total of 4,500 companies going out of business in the first six months of the year. Employment in the industry in Germany fell by 10% during the same period.

The slowdown in the EU construction market mainly affected civil engineering (+1.4% in 2002; +2.5% in 2001) - which largely depends on public sector investments - and non-residential private building (-0.7% in 2002; +2.3% in 2001). However, the increase in new buildings (+0.5% in 2002; -1.2% in 2001) partly counterbalanced this decrease.

Provided the war in Iraq does not aggravate the already difficult economic situation, the sector's growth in Europe in 2003 appears likely to continue at the levels of 2002, namely about 0.5%. A slowdown in the building sector is expected (+0.0% compared to 0.4% in 2002), partly due to the fall in new houses (-0.8% in 2003; +0.6% in 2002) and non-residential private building (-1.5% in 2003; -0.7% in 2002). On the other hand, improvements are expected in civil engineering (+3.1% in 2003; +1.4% in 2002) and non-residential public building (+2.8% in 2003; +2.6% in 2002) due to public administration interventions in several countries.

Prospects vary from country to country. Some continue to display negative growth rates (Germany -2.5%; France -0.7%, Holland -2.4%, Belgium -1.5%, Denmark -1.2), whereas those countries that have shown sustained growth in recent years are expected to experience a slackening in investments (UK +4.4%; Italy +1.7%; Spain +3.8%).

The most significant changes are expected in Portugal and Ireland, where in recent years the construction market has been one of the driving forces of the economy with two-figure growth rates. In Portugal, a 2.2% fall is expected in 2003 due to the reduction in investments in the public sector and the elimination of a number of loan concessions. Investments for the 2004 European football championships may partly offset the negative figures. In Ireland the fall (-5.4%) is due to a reduction in non-residential private building and the delay in the launch of a number of infrastructure projects.

In focus section: All data released by Fiec All data on construction activityConjoncture - EN.pdf