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Euromarket stable until 2020, predicts Euroconstruct

First publishedin World Highways
September2018
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Analysts predict strong growth in road building up to 2020 as public finances improve. Graham Anderson reports from Helsinki

European civil engineering markets – including road building and maintenance - are predicted to grow strongly between now and 2020 thanks to the increasing strength of EU members states’ national economies. The increasingly optimistic forecasts are contained in the latest construction industry research from construction market analyst Euroconstruct, based in the Finnish capital Helsinki.

“European construction is growing well on the back of low interest rates, good economic growth and pent-up demand,” said Markku Riihimäki, chief executive of Forecon, a Finnish construction market analyst and host of the recent Euroconstruct conference in Helsinki.

Road building and maintenance is predicted to be one of the main beneficiaries of this increased economic confidence, according to presentations by Euroconstruct.

Across Euroconstruct’s 19 members, output in the road construction and maintenance sector is forecast to increase in real terms by just over 16% up to the end of 2020.

By value, the biggest markets remain: France, the largest; followed by Germany; Italy; and the Netherlands. Between them, they account for almost half of total road sector output. Strong results are forecasted by France, Italy and the Netherlands while Germany expects its market to be flat.

In percentage terms, strongest growth is predicted in Eastern Europe, at just over 35% from 2017-20. Poland leads the pack with a forecast increase of 43%. However, the Polish market is expected to slow down sharply as a number of major European Union-funded investments come to fruition.

Euroconstruct’s 15 Western European markets predict road sector growth of 14% over the same period. The UK appears the strongest thanks to Highways England’s investment programme and major works such as the A14 Huntingdon-Cambridge upgrade and the M6 smart motorway project.

In addition, UK local governments say that 12% of the local road network will need essential maintenance in the next year. As a result, Euroconstruct is predicting that UK road construction output will rise by over a quarter in real terms by the end of 2020.

Although the UK numbers are encouraging, Alasdair Reisner, chief executive of the UK’s Civil Engineering Contractors Association says the market is still fragile. It remains dependent on an uncertain political, economic and public spending environment.

“There are bright spots, thanks to a number of major projects, but overall the market remains very challenging and is clearly not good for everyone,” said Reisner. He warned that Brexit – the UK’s exit from the European Union next year - is adversely affecting sectors such as the housing, commercial and industrial markets and the associated infrastructure work.

Throughout Europe, noted the Euroconstruct forecasters, the strong showing in the roads sector is part of a broader shift away from housing projects towards civil engineering infrastructure.

“Civil engineering budgets – and especially road building and maintenance – are easy to cut when public finances are under pressure,” says Riihimäki. “That is what happened in many countries after the 2008 [financial] crash and that means a backlog has built up that various authorities are now beginning to address.”

Europe’s construction output as a whole is predicted to rise in real terms by a steady 2% annually to the end of 2020.  This is below the 3.9% rise in 2017, but high enough to ease the fears of economists worried that the industry might be heading for another boom and bust cycle.

Also in the same period up to 2020, European civil engineering is forecast to rise by an average of 3.8% per year, higher than either of the previous two Euroconstruct reports.

But despite encouraging civil engineering statistics, Brexit means the UK construction market remains a cause for concern. Euroconstruct predicts that UK construction output will come to a near standstill this year and is beginning to lag significantly behind other major European countries.

The UK picture could have been worse, with the strength of the civil engineering sector helping to offset sharp declines in the office and commercial building markets. These sectors are highly reliant on upfront investment, particularly from foreign investors.

Despite UK concerns, Riihimäki remains optimistic. “In Europe as a whole, tax revenues will increase to allow for increased investment in public construction, transport networks and other infrastructure. As a result, in the next few years, civil engineering will be the engine of growth in European construction.”

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