The conference consisted of two sessions:
• The morning session focused on reviewing the situation on the European construction markets in 2015-2017.
EUROCONSTRUCT economists reviewed the consequences of recent changes of macroeconomic and financial situation in the world and updated their analysis and projections. They presented possible scenarios of the development of European construction sectors: residential, municipal, business and infrastructure.
• During the afternoon session, special topics was presented.
As a consequence of the adoption of new directives concerning procurement by the Council of the European Union at on February 11, 2014 national public procurement rules, including those for construction works, will be standardized and significantly altered in the next two years. These changes will have an influence on terms and conditions and the way public funds are spent on construction projects within the framework of the New Financial Framework 2014-2020. Construction investment in the next few years should increase because of implementation of the Juncker’s plan.
Improvement in economy will boost improvement in construction
In 2014 there was a break of the recession trends in the European economy. The main reasons for economic recovery were the decline in the oil prices and the considerably weaker Euro, as well as remaining low interest rates for financing. Comparing to the downfall of GDP in, respectively, 9 and 6 countries of EUROCONSTRUCT in 2012 and 2013, there was noted a downfall in only one country of EC in 2014 – namely Italy. In the line with the last projection, no negative changes in GDP growth are expected in all EUROCONSTRUCT countries in 2015-2017.
According to the EUROCONSTRUCT Summer forecast for the year 2015, we expect an increase by 1.8 % in the area of 19 countries of EUROCONSTRUCT, i.e. by 0.3 per cent points higher than in the forecast before 6 months. For 2016 and 2017, the EUROCONSTRUCT forecasts a growth of 2 % and 1.7%, respectively. As a result of the clear signals of improvement in the European economy, the improvement in the construction industry in the EUROCONSTRUCT area is expected after 7 years of crisis and stagnation. As a result of the clear signals of improvement in the European economy, the improvement in the construction industry in the EUROCONSTRUCT area is expected after 7 years of crisis and stagnation. The slowdown of activity in the construction in Europe lasted longer than in the other sectors of economy. The construction output peaked in first half of 2008, after which the substantial falls in the activity were recorded, reaching the lowest level in February 2010, two years after the initial downturn.
Between first half of 2008 and first half of 2010, the index of production for construction fell by almost 20 % in total, deteriorating to a level not seen since the first half of 1999. From this lowest point at the beginning of 2010, the construction output remained relatively stable until September 2011. Despite a period of relatively unchanged levels of activity during most of 2010 and 2011, the index of production for construction has fell during most of 2012. The remainder of 2013 and 2014 was a period when the construction activity fluctuated but generally followed an upward path.
Within the total structure of the construction output in 19 EC countries, the residential construction accounted for around 46% of the total activity, with a figure of 590 billion Euro (new construction: 18%, renovation and maintenance: 27.5%). In 2006, prior to the financial crisis, this share amounted to over 48%. The non-residential construc¬tion amounted to 29% in 2014, with a figure of 425 billion Euro. Civil engineering, both investments and maintenance, make up the remaining 25%. R&M activity represents half of the total construction output, with the highest level in Italy (73% in 2014) followed by Germany and Denmark (about 64% in 2014), France (51%). On the other hand, in the countries of Central and Eastern Europe in total construction output dominates new construction, with at the highest level in Slovak Republic (71% in 2014), followed by Poland (69% in 2014).
According to Summer EUROCONSTRUCT estimation, the level of construction activity will amount EUR 1,366bn in 2015. The growth rate of the total output is expect to reach 1.9% and is set to stabilize at 2.5% in the following two years. The level of construction production will reach EUR 1,436bn in 2017, remaining still far below the pre-crisis level (-14% with respect to 2007 total output). This means that after many periods of falling or low activity, the European construction industry will return to a path of moderate growth. Good prospects for the European economy will be driven by investments, and growth rate of construction in 2015-2017 will exceed the GDP growth.
EUROCONSTRUCT expects the growth in new construction by 10.1% in 2015-2017 in real terms, as compared to 9.2% in the previous forecast, i.e. by 0.9 percentage points higher. Renovation, on the other hand, will grow by only 4.2%, i.e. by 0.2 percentage points lower. For 2015-2017 there is expected a progress in all three main segments of the construction market, however, the prognoses are differentiated. The highest growth rate, 3.1%, is expected in civil engineering, including two-digit growth rate in Central-Eastern European countries due to the new infrastructural projects in transport and energetic, mainly in Poland. The growth rate of two remaining main segments will be significantly lower and equal to about 2%, annually, for the residential construction, and about 2.2% for non-residential construction.
EUROCONSTRUCT forecasts that the average growth rate of the residential construction in Central-Eastern Europe countries will be equal to 4.3% and will be more than twice higher than in Western Europe countries. The average growth rate of non-residential construction in Central-Eastern Europe countries will be equal to 3.6% and will also be much higher than in Western Europe countries, where it is expected to amount 2.1%.
Countries with the best prognosis until 2017
The highest rise between this year and 2017 is expected in Ireland and Poland. For Ireland the average annual growth in 2015–2017 should reach 10.8 % and construction output should therefore increase by 35.7 %. However, all of this comes after huge previous drop by almost 70 % between years 2007–2013.
This high, double-digit growth will be caused by the expected quick growth of the construction output for both residential and non-residential construction. For Poland, the average annual growth in 2015–2017 should reach 8.6 % and construction output should therefore increase by 28 %. This growth will be mainly the result of the quickest growth of civil engineering construction in the whole EUROCONSTRUCT area, as the growth rate in the building construction will not exceed 5%. Two next countries with significant expected growth till 2017 are Czech Republic and United Kingdom. Significant growth is also expected in Portugal and Spain, where it will return to a positive trend after a deep collapse as recorded in the seven previous years. It should be mentioned that in the years 2015-2017 most countries EUROCONSTRUCT operates in positive in terms of average annual growth. Expected low growth rate of the construction output in 5 countries: France, Hungary, Belgium, Austria, and particularly Germany, indicates the persistent stagnation tendencies in these countries in 2015-2017.
The average decrease by above half percent is anticipated in Switzerland.
More information’s on the results of 79th EUROCONSTRUCT conference in Warsaw and construction development in Europe by 2017 can be found in two reports from the Conference: “Summary Report” and “Country Report”.