Figure 1. – Gross Domestic Production, Construction Output Source: 69th Euroconstruct Dublin, June 2010

Construction output in Europe is set to decline this year for the third time in succession.

According to the estimates of the 19 Euroconstruct institutes, of which the Ifo Institute, at the University of Munich, is the German representative, the fall expected for 2010 will amount to about 4%. Accordingly, from 2008 to 2010, the extent of construction measures will fall by about 15% to ca. €1.26 trn (in 2009 prices). Construction volume increased in only two Euroconstruct countries in 2009 - - in Poland and Switzerland. In the other 17 member countries, developments were quite mixed. Whereas the decline was quite moderate in Germany, for example, Ireland and Spain reported dramatic drops.

In 2009 residential construction suffered considerable losses; non-residential construction shrank by 8.9%. Only in civil engineering was the level of 2008 maintained. For 2010 declines are expected in all three construction sectors. In residential construction building activity will only be reduced moderately (-3%). In several countries, the large number of unsold units and decline in prices still dampen the willingness of private households to buy.

In contrast, the declines in non-residential construction will again be significant (-7%). Especially businesses are exercising caution in their investments in light of the only moderate outlook for economic recovery in many places. Civil engineering construction volume in Europe is even expected to decline for the first time since 1996. Only in the telecommunications area are more construction measures anticipated this year than in 2009. A strong contributor to the negative development in civil engineering is the stronger austerity course in Spain. Among other projects, government investments in the infrastructure have been scrapped.

For western Europe as a whole the outlook remains muted. Also in 2012, the construction measures implemented should still lie below 2009 levels. In the four eastern European member countries, however, rapid growth is expected to continue again as of 2011 at the latest, primarily as a result of the energetic expansion of the infrastructure in Poland. In Slovakia, the Czech Republic and Hungary, further developments will be clearly less dynamic.

According to Annette Hughes, Director of DKM Economic Consultants, the Irish member of Euroconstruct: "Several countries have acted to lessen the impact of the recession with fiscal stimulation packages in 2008 and 2009, which supported construction. However the priority now has firmly shifted towards fiscal consolidation, which will have negative consequences for the industry, particularly for civil engineering. In a number of countries, notably Spain, Ireland and Portugal, the crises came on top of the collapses in local housing markets, leading particularly severe contractions.

Job losses have been substantial: the sector employed 13.5m workers in 2007, or 7% of the total workforce, but more than one million construction jobs have been lost in Spain and 400,000 in Portugal alone. In total we estimate the sector has lost more than 1.5 million jobs since 2007."