The European construction industry will continue to grow from 2020 to 2022 although at less than half the rate of 2019, according to a new report released by Euroconstruct on 29th of November.
Low interest rates, high levels of consumer confidence, a 40-year record level of employment, service industry growth and increased incomes have ensured a continued positive trend. However, uncertainty over world trade disputes and a slowdown in manufacturing are starting to apply the economic brakes.
The report states: “We predict that the rate of the construction growth in the [19 European countries of the] Euroconstruct area will lower in 2019 to 2.3% from 3.2% noted in 2018, and in 2020-2022 it will stabilise at the stagnation level of 1%.”
'Moderate growth is still positive'
Davide Maiello, our Head of Market & Business Intelligence for Europe & CIS, said: “We have been spoiled over the past three years and now we’re not being spoiled so much because the growth rate is moderate.
“It’s like we’ve got used to racing our Formula 1 car along a long straight and now we’ve got to slow down for the bend. The point is that we’re still travelling — just not as fast as before.”
The growth rate of European construction, says the report, will remain positive as a result of factors such as increased household purchasing power, positive finance conditions, economic growth, profit increases and governments’ insulation-friendly environmental policies.
‘Glass is still more than half full, it’s not half empty’
Davide says: “The stabilisation from 2.3% in 2019 to a level of 1% for the next three years means we are coming towards a radically lower positive development of the construction market in the years to come.
“This generates some self-inflicted worries but we should differentiate between worries of a declining market and worries about having a moderate growth market. We should not be afraid of a downturn.
“The glass is still more than half full, it’s not half empty. The growth will be lower than the previous year but the figures are still positive and we should be optimistic about that development.”
Renovation market set to outpace new build
Another element that should cause reflection is that between 2016 and 2019, the European new build market grew more quickly than the renovation market while predictions for 2020-2022 show renovation markets growing more than new buildings.
“This is typical of going from an expansion mode of more investment in new building to a more conservative situation of renovation which is a signal of a more stable construction development,” says Davide.
“In 2020 we are seeing a flat development of new buildings, but this is balanced by the positive development of 1.3% growth of renovation. As we have seen during the years of the financial crisis, renovation helps the market when investments slow down, and also supports the insulation market as today up to 60% of it is consumed by renovation in some of the most advanced economies.”
• On a world level there has been a slowdown in GDP growth due to a dip in manufacturing, US trade uncertainty and the impact of tariffs that will bite hard in 2020 with China suffering losing 2 base points percentage of their GDP growth because of that.
“Global GDP growth in 2019 has been the worse we will see since 2009 at around 2.9%,” says Davide. “But for 2020/21 we are going to come back in terms of GDP growth worldwide.”