"The year 2007 marked a new economic cycle for construction, with growth rates continuing to fall throughout Europe until 2008." That was the view of Jiri Hezky of Czech consultants URS Praha, and of many others, at Euroconstruct's July meeting in Prague. However, Euroconstruct predicts the market will steady over the next two years and pick up again by 2009.
Euroconstruct is a loose organization of leading research and forecasting institutes from 19 European countries. It meets twice a year to produce a unique set of reports on the state of the European construction industry by country and type of work. Its latest figures show that in 2006 construction output across all 19 countries grew by 3.7% in real terms. This is predicted to fall to 2.4% in 2007 and 1.8% in 2008, before rising again to 2.0% in 2009, taking output to €1.471 trillion.
The German construction market, one of the biggest in Europe, is the strongest it has been for more than a decade. In fact, growth in 2006 was much higher than predicted, at 4.2%. And although tax increases pegged back the German market, it is still expected to show rises of 2.6%, 2.7% and 2.3% in the three years to 2009.
The problems in Spain mean that Germany should regain pole position as the biggest construction market in Europe by 2009. In fact, those two countries plus the UK, France and Italy account for over 70% of Europe's construction output.
DOMESTIC AND CIVIL CONSTRUCTION
Another key trend is the continuing and rapid expansion in Eastern Europe, especially Poland. In 2006, construction output in Poland grew by 11.5%, a level many thought could not be sustained. But Euroconstruct disagrees, forecasting growth of 10.6%, 11.4% and 14.0% to 2009 – although Poland's loss of much of its skilled labour force to higher-wage economies such as the UK might hamper growth unless it can find replacements from markets further east. However, the Polish and other Eastern European markets are still comparatively small, and even by 2009, the end of the current forecasting period, they will account for just 5% of total output.
The figures for non-residential building are notable for the dominance of the UK in health, education, office and commercial building. In fact, the UK accounts for 23% of total output in this sector, and is 75% larger than the next largest national market, Germany.
The figures for health and education are more extraordinary still, with the UK responsible for well over half the construction in the education sector and almost 30% in health. The growth rate is tailing off quite sharply, and is forecast to decline to 1.6% and zero in education and health, respectively.
But the UK's other big sector, office building, is showing no signs of levelling out. Further steady growth is predicted, albeit at a slower rate than the 12.5% achieved in 2006. Again, the UK accounts for almost a third of all construction in this sector.
The residential market is still operating at a very high level, driven by rapid expansion in Spain and Ireland. However, both these markets are slowing. Spain is still expected to show growth of 4.7% in 2007, before contracting by 0.9% and 1.2% in 2008 and 2009.
In Ireland the picture is worse still, with the housing market expected to contract by almost 10% in 2007 alone, and then a further 6.3% in 2008. In Europe as a whole, following growth of 4.1% in 2006, housing is now predicted to show year-on-year rises of just 1.3%, 0.5% and 0.9% up to 2009, taking annual output to €689bn.
Civil engineering makes up just over 20% of total output across Europe, but is hugely important, as without investment in infrastructure such as roads, railways and water other projects would not be able to progress. Spain is the biggest market by far, with output expected to reach €56bn by the end of 2007 and €62bn by 2009.
Ireland too remains strong, as government spending tries to pick up some of the slack created by the declining housing market. Meanwhile, in the UK the 2012 Olympics is helping to boost the sector after years of decline.
But it is the figures for Poland that really catch the eye. Total civil engineering output is predicted to rise from €9bn in 2006 to almost €16bn by 2009 – an indication perhaps of where future growth will lie.