Construction output growth across Europe will drop to to 0.2% in 2023 and a flat 0% in 2024 because of war in Ukraine, rising interest rates, inflation and material shortages, the Euroconstruct research group said.
It expects 3% growth in 2022 but a barren stretch until 2025.
“It looks like it could be a rough period of adjustment for the industry,” said Experian chief economist Mohammed Chaudri, adding that “nearly all factors which affect construction demand are negative, including the economy, consumer prices, interest rates and consumer confidence”.
Demand for civil engineering is buoyed by investments in low-carbon energy and transport schemes, but the prospects for residential output dragged the outlook downward.
The group said the bygone era of low interest rates led to a boom in new-build housing across Europe, but that housing sales have slowed down, consumer confidence has dropped and there is now oversupply in many countries.
Barbour ABI’s chief economist Tom Hall said the outlook deteriorated over the summer and autumn.
“It was only as recently as June that we were expecting 2.2% growth in GDP [next year] – this is now as little as 0.5%. Businesses would do well to diversify their portfolios, especially if they are focused on residential projects. There is a glimmer of light though, with civil engineering looking more positive as many countries invest in low-carbon energy and renovate existing infrastructure.”
Currently one of the worst-performing economies in Europe, the UK faces a negative construction output growth cycle in 2023 (-0.4%) alongside Germany, which faces a negative or stagnating outlook for growth all the way up to 2025 (-0.4%).
Construction will also contract in eight countries, the most in Sweden and Finland. In both countries, construction has been high, so the decline partially marks a return to a more normal construction volume, said Euroconstruct.