Since the start of the current recession in 2007, the European Economic Area had been in a constant state of crisis, uncertainty and contraction. Over the last few months, though, a greater degree of stability has come. In the UK, we are beginning to edge out of recession. Here we can expect the construction industry to grow from 2014 onwards. But the construction industry is increasingly international, and construction professionals are increasingly working on overseas projects, so one question that arises is: "will the levels of growth predicted for the UK be the same across Europe?"
The UK is the third largest construction market in Europe (after Germany and France), but it accounts for only thirteen percent of European construction output. A pick-up in the UK doesn't always mean increased demand for construction products across Europe. A broader understanding can help us identify potential markets for UK expertise.
The good news is that the European construction sector is set to grow too. The latest prediction by Euro-Construct, is that, overall, construction output in Europe will expand during the period 2014 to 2016. This follows two years of contraction in 2012 and 2013. The growth will not be spectacular. Growth is forecast at 0.9% in 2014, 1.8 % in 2015 and then 2.2% in 2016. This is below UK forecasts, which are consistently over 2% for the 2014 to 2016 period.
Europe is politically and economically complex so the picture for the construction sector is too.
The European construction industry is one with great national variance. For simplicity, it's convenient to divide the European economy into four areas (for those countries included in the Euro-Construct forecast):
- Western Europe, made up of Ireland, the UK, France, Germany, Belgium, the Netherlands, Switzerland and Austria
- The Scandinavian countries; Norway, Denmark, Sweden and Finland
- Southern Europe; Spain, Portugal and Italy
- Central and Eastern Europe; Poland, Czech Republic, Slovak Republic and Hungary.
Each of these four areas has a different outlook for the coming years.
For Western Europe, we can expect to see steady growth in the coming years. Germany, the largest economy, will see construction have an average growth of around 1.2%. France will be the weakest large performer in this set. Ireland, having shrunk dramatically post crisis, looks set to have its construction sector impressively grow, annually, by over 6%.
The Scandinavian countries remain successful with underlying growth for the next three years in all countries. Denmark, which was worst affected by the crisis (losing around a quarter of its construction output) looks now to be back on track.
Southern Europe is still struggling. Between 2007 and 2015, Spain will have lost 80% of its annual construction output. For Italy, that figure is around a quarter. The next few years look set to be more about stabilisation, a halting of the rapid decline, rather than a return to growth. But after the past five years, this is to be welcomed.
Central and Eastern Europe looks set to grow. Poland accounts for 60% of the construction output in this area, and Poland has grown throughout the current recession; after a small dip in 2012 - 2013 its growth will resume. The other three countries saw a significant reduction in output after 2007, but now all look to be returning to either stability or growth.
Like all forecasts, we need to treat these with some care. Both Europe and the UK have some deep problems that are not going to go away in the next two years. With increasing globalisation and convergence, the world economy is doing better than it has ever done before. But in Europe, there are some persistent problems. Europe's share of global GDP is decreasing. Total European debt is increasing, not shrinking. Productivity remains poor in some countries. Banking insolvency risk remains high, though decreasing. If the broader European Economy fails because of any of these things, so too will the construction sector. But it's fair to say that European economies are more stable now than they have been since the recession started. We have no compelling reason to expect the worst.
So, broadly speaking, like the UK, the European construction market is set to grow. But not all countries will grow at the same rate, and some won't grow at all. None the less, the signs are that finally the crisis in construction is ending. Tentatively we are starting to repair the damage done. There are real opportunities.