With the fastest-growing construction industry in Europe, Britain is the envy of its continental neighbours. And a revealing report shows that it's all down to the economy-transforming magic of the PFI.
German and French construction executives must be wishing they were British.

Not because they envy our weather or our cuisine, but because the construction industries of Germany and France have been in recession for several years, while Britain has had the European Union's fastest-growing construction industry for two years in a row. That's the message from Construction Activity in Europe, the comprehensive annual survey just published by the European Construction Industry Federation (FIEC).

The report puts this fortunate state of affairs down to three magic letters: PFI. The introduction states: "The experience of the United Kingdom, where construction activity is faring well, deserves to be highlighted. This is because partnerships between the private and public sectors can serve to underpin our sector as a whole – this is certainly a path which should be carefully studied." So the Brits have invented something to be proud of: a form of procurement that seems tailor-made to enable the public sector to increase infrastructure spending whenever an economic slowdown is forcing the private sector into the doldrums.

The eurozone, in contrast, is hamstrung by the Stability and Growth Pact, which has the opposite effect to the PFI: it makes it harder for governments to spend their way out of recession because it caps the amount they are allowed to borrow. The eurozone's three largest economies – Germany, France and Italy – all saw their economies shrink in the last quarter.

In the European Union as a whole, the construction industry has been growing at an anaemic rate: 0.7% in 2001, 0.6% in 2002, and a mere 0.5% is forecast for this year. In Germany, the industry has been in recession for eight of the past nine years, shrinking 6% in 2001, 5.5% in 2002 and an expected 2.5% this year. The industry has had a net loss of a million construction employees since 1995, falling from 2.8 million to 1.8 million.

The experience of the UK deserves to be highlighted … public–private partnerships should be carefully studied

Construction Activity in Europe

Things haven't looked much better for Ireland. After a period of double-digit growth throughout the 1990s, the construction sector crashed to earth last year with a fall in output of 3.5%; a further drop of 5.4% is expected this year. France's output also fell 0.8% last year, and the FIEC is predicting a repeat performance this year.

Against this background, the British figures appear even more impressive. Our construction industry grew at a staggering 8.1% last year, helped along by a 12.2% increase in the value of newly built homes and a 15% increase in non-residential public building, much of it financed by the PFI. This year Britain's overall growth rate is expected to fall to a more sustainable 4.4%.

Hungary is the most reliable of the new EU members: construction growth there has averaged 7% over the last decade, and is expected to reach 8.5% this year. Other eastern European countries have also seen impressive growth rates, but beware volatility: Romania, for example, saw its growth rate collapse from 29% in 1994 to -24% in 1997. FIEC says: "The markets in countries soon to become members of the union constitute a huge potential for construction activity", and predicts partnerships between large multinational construction firms and local firms in new member states will play a major role in the industry's development.