In Germany, this still seems to be the case at the moment. In the first half of 2024, output in civil engineering rose by a total of almost 2 percent. According to the German Construction Industry Association's (ZDB, Zentralverband des Deutschen Baugewerbes e.V. ) half-yearly report, public-sector civil engineering rose by around 0.5 percent, and commercial civil engineering by around 3 percent.

New orders in civil engineering up to July 2024 are seven percent higher than in the previous year, while in commercial civil engineering they are a good 1.4 billion euros above the previous year's level (+11 percent).

Public-sector investments in civil engineering in the first half of 2024 are also higher than in the previous year. Incoming orders as of July are 4.0 percent above the previous year's level. By July, civil engineering revenues are a good two billion euros higher than in the previous year (+12 percent).

A brief comparison with the general construction industry in Germany (half-yearly balance 2024):

• Turnover in the main construction trade January to June 2024: approx. 48.6 billion euros (in real terms minus 2.2 % compared to the same period in 2023)
• Forecast 2024: turnover minus 3%
• Employment: minus 30,000
• New orders for residential construction in the first half of 2024: nominally minus 12.6 percent below the previous year's level (2023)
• Turnover in residential construction: approx. 10.75 billion euros (minus 12 percent)

It is quite clear that civil engineering is benefiting not only in Germany, but throughout Europe, from the pronounced need for action by governments, which arises from political energy and environmental goals, the adaptation of transport infrastructure and the necessity for general network modernization. Thus, the prioritization of these focal points in the national budgets as well as the EU funds (Recovery and Resilience Facility) are playing into the cards of civil engineering. In particular, financial support from the European Union is of great importance for Eastern European countries.

The expansion of rail networks, energy supply infrastructure and investments in telecommunications networks are particularly dynamic for the generally positive economic figures in civil engineering.

And what about civil engineering in the UK?

The BCIS infrastructure forecast 2Q2024 to 2Q2029, published by Dr David Crosthwaite and this team, provides information and predicts a substantial increase in output of 19 percent in the next five years for civil engineering. Over the same period, civil engineering costs will rise by 15 percent and tender prices by 23 percent.

This forecast is based in particular on the new government's activities in the energy sector. Wind energy will receive a boost from extensive offshore and onshore projects. However, the continuation of major projects such as HS2 (UK's high-speed rail network) and EDF's two new nuclear reactors at Hinkley Point C (3,200 MWe) in Somerset also play a role.

The government in London has announced a 10-year infrastructure investment strategy. However, further details are still awaited and are expected in the context of further budget planning.

The expansion targets for renewable energies are ambitious worldwide. However, electricity from the sun and wind also causes problems as it is not permanently available and, for example, is generated in excess during strong wind events or in summer in the midday sun. But we need stable power grids in terms of voltage and frequency. Many renewable energy sources are not plannable, they are volatile and thus represent a burden for the grids. The fluctuations must be balanced and overproductions are lost unused.

Battery storage systems have been identified as a central solution to this problem. They provide the necessary flexibility because the battery storage systems can provide their full capacity in seconds. If there is an excess of electricity from renewable sources, the storage systems absorb it. The technology is so sophisticated that an efficiency level of around 90% can be achieved.

The effective lifespan of large batteries is around 15 years. Thanks to advances in technology over the last 10 years, BESS systems have become 80% cheaper and thus economically viable.
The problem and demand for a stable solution and the fact that battery storage technology has become profitable will have the positive effect of increasing the market to 120 to 150 billion US dollars by 2030.

According to a study by the Fraunhofer Institute for Solar Energy Systems ISE, Germany alone will have to expand its battery storage capacity by a factor of 200 to 104 gigawatt hours by 2030 in order to be able to obtain 80 percent of its electricity from renewable sources. The European Court of Auditors sees Europe as clearly lagging behind in a global comparison of battery storage capacities and therefore calls for a new strategic action plan in the special report 15 (year 2023), with a special focus on ensuring access to sufficient raw materials, the rare earths.

The greatest demand and growth in BESS is expected in the so-called FTM (front of the meter) area, the area of electricity generation and distribution. This is estimated at around 29 percent. The commercial and industrial and residential sub-segments in the so-called BTM (behind the meter) area will each grow by 13 to 14 percent by 2030. This is the result of research by McKinsey & Company.

The key FTM area includes the players involved in renewable energies, developers, utilities and grid operators. Most of the money invested in BESS is still spent on services that increase the flexibility of energy suppliers. In the future, investments will focus on systems and large-scale battery storage that meet the demand for short-term storage of solar and wind energy.

To successfully enter the BESS market, you have to think big and act fast. The market is in a real boom phase, with the major players dynamically positioning themselves in prime locations. At some point, it becomes difficult for smaller developers and technology companies to keep pace or even enter the market.

The mood in the construction industry remains gloomy. Above all in the area of building construction, which still covered four-fifths of the construction volume before 2024. Civil engineering, for which steady growth continues to be forecast, accounted for around one-fifth.

The decline in construction output in Europe is due to several economic and structural factors:

The European Central Bank (ECB) has raised key interest rates in recent years to curb inflation, which has led to higher financing costs for construction projects. Mortgages are becoming more expensive, which reduces the demand for residential real estate, while the demand for it remains high. There is a housing shortage, particularly in the lower price segment. Under these conditions, however, investors are hesitant to initiate construction projects.

Added to this are rising wages, a shortage of skilled workers and the sharp increase in material costs since the beginning of the COVID-19 pandemic and as a result of geopolitical tensions. Particularly noteworthy here is the conflict in Ukraine. The prices for steel, concrete and wood are at an expensive level.

In relation to Germany, the economy is falling deeper into recession. Current figures place the German economy at the bottom of the G7 states.

However, there are regional differences in Europe. This is also reflected in the outlook for construction output in the coming years, for which a modest recovery is expected for the Euroconstruct area.

The Scandinavian countries Finland, Sweden and Norway are forecast to see a healthy increase of up to 7.5% (Finland, 2025) and 6.0 to 6.7% (Sweden, 2025 and 2026), while only a slight recovery from -3% and -3.7% in 2024 to around -0.2 to +0.7% in 2026 is expected for Germany and France.

The construction industry in Poland has been continuously growing for three years. Coming from +3.5% in 2021, +5.9% in 2022, and between +3.9 and +3.5% in 2023 and 2024, growth of +5.0 and +6.0 percentage points is forecast in 2025 and 2026.
The UK came from a difficult year in 2020 with a big minus of 14.2% to a big plus of 11.7% in 2021. It fell back to -0.6 percentage points in 2024, but is expected to grow by +4.1% and +2.5% in 2025 and 2026.

As already mentioned, residential construction remains a problem area. A decline in the completion of residential units of around 17% is forecast for the entire Euroconstruct area between 2022 and 2026. France, Germany, the UK and Poland are the strong markets in this area. In 2022, around 1.1 million residential units were built in these countries. By 2026, there will only be around 880 thousand completions.

There will be no significant impetus in the commercial sector, while civil engineering will continue to grow between 2024 and 2026. This will probably be the case in all sub-sectors without exception. More on this in a further article shortly.

The term rare earths is not based on the widespread belief that they are rare in occurrence. The metals are relatively abundant in the earth's crust. However, they are widely dispersed and rarely found and extracted in economically viable concentrations. High concentrations and thus favorable mining conditions are found in China.

China has the world's largest deposits and reserves and dominates world production, accounting for approximately 70 percent. Other significant mine production is located in the United States, Burma and Australia. In 2023, 43,000 metric tons were mined in the United States, 38,000 metric tons in Burma and 18,000 metric tons in Australia. By comparison, China mined 240,000 metric tons in 2023.

China also holds the leading position in global reserves. The country has estimated reserves of 44 million metric tons. Large deposits are located in Inner Mongolia. The USA has only 1.8 million metric tons left and already imported 72 percent of rare-earth compounds and metals from China between 2019 and 2022.

The distribution of rare earths has geopolitical implications. Myanmar, formerly known as Burma, has the world's second-largest reserves of rare earths and plays a significant role in China's strategic considerations in Southeast Asia. The dependency of Western countries is becoming apparent and entails supply risks.

In addition to the risks of dependency, there are also other issues surrounding rare earths. The mining and processing of rare earths often has a significant environmental impact. Due to the issues of dependency and the environment, efforts are being made to strengthen the circular economy in order to recover rare earths through recycling, for example from batteries, permanent magnets and fluorescent lamps.

Bureaucracy is supposed to help make procedures transparent and fair for everyone and build trust in making decisions. However, it is obviously becoming more and more of a burden, especially for medium-sized companies.

Medium-sized companies name bureaucracy as their number one concern. While entire departments in large companies deal with which new legal regulations for business or, for example, permits must be complied with, medium-sized companies simply lack the human and financial resources to do so.

Although the bureaucracy index in Germany has fallen from 2012 (100) to 98.5 (2023), small and medium-sized companies feel that dealing with government offices, chambers and authorities is increasingly or very burdensome. This impression is not surprising in view of the index trend in recent years. In 2022, it was still just below the value of 97.

55 percent of family businesses state that bureaucratic costs are the biggest barrier to investment for them. Many small companies therefore do not even tackle certain projects because of the bureaucratic hurdles. Innovative projects are often affected.

But even simple projects, such as the founding of a startup or company, seem to test the patience of the founders. More than 70 percent of the founders surveyed said that forms and processes for founding a company were too complex and that requests were processed too slowly.

68 percent of entrepreneurs in Germany say they have already had very bad experiences with bureaucracy.

There is no denying that the reduction of bureaucracy needs to gain noticeable momentum, especially for small and medium-sized enterprises. Germany wants to achieve many things in the coming years and decades and remain internationally competitive. First and foremost in the areas of energy, mobility, AI and digitization. To this end, the innovative SME sector in particular needs to be relieved of bureaucracy.

This is shown by the Construction Damage Report for Civil Engineering and #Infrastructure of the VHV insurers. Almost 40,000 claims were examined in the period between 2017 and 2021. The focus on the average costs per claim and year is even more pronounced, with an increase of 31 percent.

Most claims occur in line construction. 57.5 percent of the damage to lines is caused by the use of working machines and 19.7 percent by execution and installation errors. Communication lines are by far the most affected or damaged type of line.

Inaccurate and incomplete site plans were identified as the cause of damage by around 95 percent and imprecise planning information by around 88 percent.

The motivation to contain a further increase in damage repair costs, for example through the introduction of a central line cadastre, is great, especially since the risk of damage occurrence should increase significantly with a focus on digitalisation, the energy and transport transition and the resulting increasing density of the network structure in the future.

According to the Ifo Institute, the real estate market in #residential construction continues to head for a severe crisis. According to the latest survey, more than 18.9 per cent of construction companies in the residential construction sector complained about cancellations of scheduled projects in July 2023. In the previous month of June 2023, the figure was 19.2 per cent. Compared to the long-term average of 3.1 percent, these are drastic figures.

High interest rates coupled with high material and #construction costs are to blame for the development. New business is strangled under these conditions.

In July 2023, more than 40 percent of construction companies in the residential construction sector complained about a lack of orders. That is one in four out of ten companies. In June 2023, it was already around 34.5 percent. Compared to the previous year, this percentage has roughly quadrupled.

While many companies are still drawing on order backlogs from better times, every tenth company is now already in crisis mode. In the current survey, 10.5 percent of the companies say they are already experiencing financing difficulties.

According to the survey, companies in the residential construction sector are extraordinarily pessimistic about their business prospects, scoring minus 51 points.

With a focus on the politically set goal of meeting the high demand for affordable housing in particular, the framework conditions must be readjusted by politicians. Otherwise, housing construction will be in free fall within a very short time.

In 2022, the share of transactions in certified properties increased by 4.9% year-on-year to a total of 30.6%. In office properties, a peak value of 46.2 % was reached, so that almost every second newly constructed office building is a green building. In the logistics sector, the share rose from 16.5 % (2021) to 27 % (2022).

The demand for sustainable real estate is particularly high among institutional investors, such as insurance companies and pension funds as well as open-ended funds. The focus is on the so-called A-cities Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart.

Green buildings are properties in which attention is paid to a maximum reduction of CO2 emissions in the planning, design, construction, operation and also the subsequent deconstruction (reuse of materials). This is assessed in so-called life cycle assessments. Among other things, EPDs (Environmental Product Declarations) for the classification of building products form the basis.

The technical development of green buildings will continue to be dynamic. As already reported, example projects have shown that even simple changes in structural design, away from conventional construction methods, can lead to additional CO2 savings of up to 30%.

With the growing importance of sustainable real estate, the pressure is increasing to create more incentives for this as well, since this savings potential is currently not yet taken into account in the ESG criteria.

With the introduction of the HOAI 2021 (Honorarordnung für Architekten und Ingenieure), the fees for planning services are no longer bound to a fixed framework, which obviously leads to problems and quality losses in the implementation of contracts.

Thus, 18% of the respondents stated that the price had been the decisive criterion for the award of the contract in over 90% of their submitted bids. For 64% of the respondents, the price criterion was decisive in over 70% of the bids submitted. 52% of the survey participants also stated that the potential clients had expected a price reduction below the base rates.

The possibility of flat-rate discounts resulted in price reductions of around 30% below the base rates on several occasions.

On top of that, for many of the respondents the award processes are not very transparent. 82% of the respondents state that they have not to receive sufficient justification for their rejection. This is certainly one reason why around 78% of respondents consider it rather useful to publish the evaluation and decision matrix in the public procurement procedures.

The public contracting authorities are called upon to make improvements. The result of the survey cannot be understood in any other way. After all, the effort required to process the bids is not small. 83% of the engineers state that the effort required for the award procedures is rather inadequate or must be rated as much too high.

Surprisingly, the digitalisation of the award procedures is to blame for the increased effort. Actually intended as a simplification, electronic awarding apparently has the opposite effect.