European output growth set to slow

European Construction output growth will slow over the next three years, according to leading forecaster Euroconstruct.

Figures released last week predict that output growth will fall from 3.1% in 2000 to 1.8% in 2001 and 1.7% in 2002 across the 19 countries surveyed.

Speaking at its twice-yearly conference in Vienna, Margarete Czerny of Euroconstruct said a drop in growth for the five largest construction economies was the biggest factor in the overall slowdown. “The contraction in the big five will make itself evident throughout Europe,” she said.

The UK, Spain, Italy, France and Germany, which together account for 70% of construction work in Europe, will see their combined output growth shrink from 3.3% in 1999 to 2.8% this year; then 1.4% in 2001 and 1.3% in 2002.

The story was gloomy throughout much of Western Europe, where about two-thirds of countries downgraded growth forecasts for 2001-02 made in January.

Forecasts for UK output growth in 2002 have been revised down from 1.4% to just 0.5%.

Czerny said: “In Great Britain, where general growth in the construction industry has been below the Euroconstruct average, the present trend will continue, with growth eventually stagnating in 2002, as the boom in office and industrial construction comes to an end.”

Of the big five countries, only Germany is expected to see output grow faster over the next three years, after four years of decline. However, its output growth forecasts for 2000-02 were also downgraded from an average of 1.5% to 1%.

France and Spain are expected to see a downturn in housing construction projects, and a drop in renovation work is forecast to cause stagnation in Italy. For the Republic of Ireland, growth forecasts for 2000 have been downgraded from 11.4% to 6.7%. Growth is expected to pick up next year but forecasts for 2002 have been revised down, from 3.8% to 2.7%. This is because Euroconstruct expects the Irish residential market to stagnate for the first time in 10 years as the recent surge of inward investment ends.

In contrast, demand for construction in Central and Eastern European countries will remain considerable, with growth expected to continue at an average of 6.4% over the next three years, compared with 2% for Western countries. Of course, these countries account for much less total output than the Western European nations.

Euroconstruct attributed the forecast slowdown in Western European work to the after-effects of long-term rises in interest rates and a stagnation in demand for residential work.