The latest forecasts for the continent have been further reduced due to weak confidence and non-residential difficulties, despite a stronger outlook for housing.
- Return to growth won’t offset declines
- Spanish concerns set to continue
- Norwegian construction faring better
- Non-residential activity struggles
Forecasts for construction output growth in Europe have been downgraded with the publication of the latest EuroConstruct report. Norway is a stand-out performer, but Spain is still struggling and non-residential output remains a concern.
Construction output across Europe will return to growth by 2015, but at a lower rate than previously thought. Overall, European output from the industry in 2015 will be worth less than in 2012.
Residential construction is showing the largest bounce back into recovery, followed by civil engineering. Non-residential construction, however, is forecast to show virtually no growth as business and consumer confidence continue to be weak.
The latest forecasts from EuroConstruct show output is set to fall by 2.8 per cent across the continent in 2013, more than previously thought when the network of construction forecasters last reviewed its predictions in December.
Back then output was forecast to fall by 1.6 per cent this year, and a year ago 2013 output decline was expected to be just 0.4 per cent.
Return to growth won’t offset declines
EuroConstruct now expects only marginal growth in 2014, with 2015 slightly stronger at 1.7 per cent. However, while showing some positivity, this growth will not make up for previous declines.
Total construction activity will remain well below the peaks reached in the last decade, and will even be below levels of 2012 if the forecasts are realised.
In 2012, total construction output was estimated to be worth 1.32tn euros, against the 1.31tn euros forecast for 2015. Between 2009 and 2015, construction output across those countries covered in the forecasts is expected to contract by 8.8 per cent. Western European countries account for the majority of the fall.
“It is quite subdued sentiment across the EuroConstruct forecasting panel, with not a huge amount of short-term optimism, and when recovery does start it will be from a lower base rate,” says James Hastings, head of construction futures at Experian, the UK member of EuroConstruct.
Spanish concerns set to continue
Spain’s woes continue, with the country being the only one to be set for declines throughout the entire forecast period. It contributed less than 6 per cent of output last year, and by 2015 will have a smaller construction output than Norway, Switzerland and the Netherlands at the current forecasts.
“The ‘big five’ countries have effectively become the big four”
James Hastings, Experian
“The ‘big five’ countries have effectively become the big four,” Mr Hastings says. Indeed, the estimated output for Germany in 2012 was 275.3bn euros and 168.9bn euros for the UK. Spain’s output last year was worth 73.8bn euros, a dramatic drop from the 164.6bn euros it contributed in 2009.
In 2013, output from Spain will be worth 4.4 per cent of total across all 19 countries, compared with 11.4 per cent in 2009.
By contrast, the UK’s contribution to the total output will rise from 11.7 per cent in 2009 to 12.8 per cent in 2013.
Ireland has the highest forecast growth rate in 2015 but suffered some significant declines over recent years. “Ireland is looking optimistic, as it had previously hit rock bottom and is coming up from this,” says Mr Hastings.
“It has taken the pain and moved into the gain territory. One thing helping it is the National Asset Management Agency, which has taken on a lot of liquidity from the big four banks and pumped money back in, so there is money for construction.”
Norwegian construction faring better
The countries set to see the strongest rates of growth according to the forecasts are Norway, Denmark, Hungary and Slovakia, though the latter three saw significant declines previously.
The Nordic countries are showing some relative strength. Norway in particular stands out, with growth of 5.7 per cent forecast for this year – stronger than previous years and building on momentum from 2011. Its forecast output for 2015 is 53.1bn euros, some 25 per cent higher than in 2009.
“Norway has a huge public surplus, rather than debt,” Mr Hastings says. But even the Nordic countries are seeing weak growth in non-residential construction, he adds.
Non-residential activity struggles
Non-residential construction will see virtually no growth over the forecast period, with just 1 per cent expected in 2015. The 2008 peak has been followed by a decline of around 21 per cent, according to EuroConstruct, and aside from a flat year in 2011, the sector has been in negative territory from 2009.
“Non-residential construction in the form of demand for offices and retail is fairly weak across the board,” Mr Hastings says. “Major commercial sectors are not doing very well, even in the Nordic countries. The sector is affected by business and consumer confidence.”
“Non-residential construction in the form of demand for offices and retail is fairly weak against the piste”
James Hastings, Experian
He adds that the public sector across Europe is also facing challenges. “The public sectors across most countries are under pressure and these countries are keeping a tight control over public spending.”
Residential construction has the strongest outlook through to 2015, while civil engineering will see growth by the end of the period, having been the only sector to see upward revisions to forecasts. However, residential’s improvement is against the background of significant declines earlier in the downturn.
While the overall forecast is for growth, the continued downgrades in response to short-term uncertainties indicate a bumpy road ahead for the industry, though some countries are set for stand-out performances.