Of course current construction volumes are well documented, but given the delay before economic trends affect the construction market, and the variety and complexity of factors involved, future construction volumes are hard to predict accurately.
Prediction model developments construction sector
Thinking in solutions, USP started collecting data from players that are involved in the earliest stages of the construction process, the architects, which led to the birth of the European Architectural Barometer in 2009. Using architects from eight European countries as early indicators, we have gathered quarterly data on their order book development, turnovers, postponed or cancelled projects, GDP, new building permits and more for about a decade now. Based on a combination of these current developments and expectations of architecture firms and other indicators such as consumer, industrial and construction confidence, USP has developed a remarkably accurate prediction model for future developments of the construction sector.
Based on that model, a growth of construction volumes of just over one percent is predicted in the overall European market for the coming two years.
This leads to predicted construction volumes of 522 billion Euros in renovation and 410 billion Euros in the new build sector in Europe as a whole. Zooming in on separate countries, however, major differences appear.
The construction sector in the UK is more new build driven, as the share of new build volumes is higher than renovation. For the UK, our model actually predicts a decline over the next few years. We have to be careful with interpreting these results, however. The impending Brexit, and possible consequences for investments and labour shortage in the construction sector, leads to a lot of uncertainty that will influence architects’ sentiment and opinions as well. Although this prediction model has proven itself over the years, uncertainties like these may lead to less reliable results in the UK. Nevertheless, it is evident that construction volumes in the UK will get a hit, we just have to be careful with predicting how big that hit will be.
In Germany, renovation has a higher share in volumes than the new build sector, which leads to a more stable situation. As a result, long-term effects of the crisis that were seen in countries like France, Spain or Italy, were not seen in Germany. Although 2019 was a difficult year for the construction sector in Germany, as it was in most European countries, the outlook for 2020 and 2021 is good. Despite a lower economic growth, predicted construction volumes show a rising growth in the next two years.
The French construction market is also based more on renovation, but less so than in Germany. In France, the effects of the crisis have lasted longer, and afterwards growth was small. For 2019, predictions of construction volumes were even negative, but based on our model we expect this to change into positive numbers in 2020 and 2021.
In Spain, the new build share is much higher, which leads to a more volatile market. Spain was hit very hard by the crisis and, just like France, had a long struggle to get out of negative figures of construction volumes. The turning point was in 2014-2015, after which the Spanish construction market showed a solid growth that we predict to continue for the next two years.
Similar to Spain, the Italian construction market was hit hard by the crisis and took even longer to recover, despite the fact that renovation has a higher share of construction volumes than the new build sector. Only small growth numbers in recent years, and similar small growth predicted for future years, betray a market that is still volatile.
The Netherlands is another country that was hit hard by the crisis, even resulting in a double digit percentual decline of the Dutch construction industry in 2012. The market recovered with fast growth of construction volumes in 2015-2017. Although a dip is seen in 2019, we predict a solid growth of construction volumes for the next two years.
The Belgian construction market was hit less hard by the crisis, mainly because of a strong new build residential market which is less sensitive to crises than the new build non-residential project market. However, Belgian growth of construction volumes also show a dip in 2019, followed by only a slight growth of around one percent in the next two years.
The Polish construction market was less affected by the crisis. Construction volumes showed solid growth since 2010, except for a negative dip in 2014. Growth of construction volumes continues, although 2019 is also a more difficult year for the Polish construction market, and future percentages will not be as high as they were before.
Despite some more negative economic figures in large markets like Germany, there is no major effect seen yet in the overall European construction sector. 2019 was a weak year though, and it depends on the development of the overall economic situation, and the influence of factors like trade wars or the impending Brexit, how the construction market will develop in the years to come. Although it is very much possible that these trends and factors will affect the construction sector in European countries, these effects will come with a delay.
About USP Marketing Consultancy
USP Marketing Consultancy is a leading international market research agency that is specialized in the construction, installation and DIY sector for over 25 years. USP Marketing Consultancy works for internationally renowned companies, such as AkzoNobel, Philips, Grohe, Forbo, etc. Our clients often have pan-European questions about their brand awareness, customer journeys, market opportunities, e-commerce trends and other research needs. USP Marketing Consultancy delivers the insights to make decisions and acts as a marketing advisor for its clients.