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.