EUROPEAN UNION

Overall construction activity

The Covid pandemic provoked an unpredecent economic crisis, with EU GDP contracting by 5.9% in 2020. European economies began recovering from the effects of the crisis in 2021, with the EU’s GDP growing by 5.3%. This growth was driven, to a large extent, by an increase in domestic demand. In Italy, for example, gross fixed capital formation rose in volume by 17.0%. Nevertheless, the effects of the Covid pandemic were still felt in the economy. In several Member States, such as Austria and Spain, growth was slower during the second half of the year due to a spike in cases. This slower growth can, however, also be attributable to rising inflation.

While the effects of Covid on the economy have waned, several problems affecting the construction industry still persist. In several Member States there is a lack of skilled construction workers. In Germany, for example, roughly a quarter of construction companies consider this to be a major issue of concern. Another major concern is the supply and prices of construction materials. The ongoing war in Ukraine has further disrupted supply chains and prices of raw materials continue to rise. Energy prices have also gone up significantly. These developments have the potential to slow down  construction activity this year and the first signs of this are already visible. 

Overall, construction activity in Europe began recovering in 2021. Strongth growth was registered in several Member States. In France construction activity increased by 10.5% in volume, after a decrease by 14.4% the previous year. In other Member States, however, the decline in activity in 2020 was compensated by the growth observed in 2021.This was the case in Austria where construction activity increased by 5.4% in 2021 after a decrease of 3.7% in 2020. Growth is expected to be overall slower in 2022. While the outlook for most Member States is generally positive, some have yet to begin recovering from the crisis. In Bulgaria, for example, the construction output decreased by 30,7% in 2021 compared to the previous year. Furthermore, the impact of the on-going war in Ukraine is seriously undermining the developments of construction activity and thereby leaving a significant level of uncertainty about the overall forecast.

Construction had a stronger recovery than initially expected in summer 2021, when FIEC forecasted an increase in investment of 4.2%. Total investment in construction increased by 5.2% in 2021 and amounted to €1.6 trillion, corresponding to 11.1% of EU GDP. Italy (+16.4%) registered the largest increase in investment, followed by Estonia (+10.7%), Greece (+10.6%) and France (+10.5%). While a majority of countries experienced a growth in investment in construction, Spain experienced a slight decline (-0.9%). However, Bulgaria is the country hit the hardest as investment went down by 19.2% compared to the previous year  In 2021, investment in construction is expected to resume growth at a rate of 2.2% with all segments expected to continue recovering.  All countries are expected to get back on track, particularly Spain (+5.4%). Ireland is predicted to have the strongest growth (+7.3%). 

In terms of employment, the sector employed 12.3 million workers in 2021, an increase of 3.8% compared to 2020. An increase of 2.4% is projected for 2022.

Housebuilding

New housebuilding represents about one-fifth of the total investment in construction. Rising by 7.2% in 2021, it was one of the main drivers of the overall increase in construction investment. Being among the heavyweights in construction, the recovery was mainly driven by the substantial increases recorded in France (+24.1%) and Italy (+12.05%) with a smaller increase in Germany (+2.3%). On the contrary, a decline was recorded for Spain (-4.8%), the only country for which this happened. 

In 2022, markets in most countries are forecasted to grow. In France and Italy investment in new housebuilding is expected to rise by more than 10%. Along with Spain (+5.4%), France (+15.0%) and Italy (+10.2%)  will be the main drivers of growth in this segment in 2022. Overall, investment in new housebuilding is forecasted to increase by 5.7% with the largest rise expected in Slovenia (+15.7%), a country coming off the back of two years of strong growth in this segment, with Ireland (+15.0%) coming as a close second. Growth can be explained by housing shortages and favourable financing conditions in many countries. 

Rehabilitation and maintenance

Investment in renovation represents slightly under one-third of total investment in construction. Having proven to be the least volatile segment over the last decade and having served as a stabiliser in the aftermath of the financial crisis from 2008, investment in renovation works went up by 5.7% in 2021 – after a decrease of 2.6% the previous year.  Investment in renovation is most significant in Bulgaria, Italy and Slovenia, with increases of over 20%. Nevertheless, investment in renovation is expected to slow down, growing at rate of 1.1% in 2022. 

In the longer term, however, this segment has the potential of becoming an even more substantial driver of growth for the construction sector as the renovation of buildings is being put at the heart of European and national climate policies, in particular through the Renovation Wave, presented by the European Commission in October 2020.  According to the European Commission, additional annual investments of €275 billion are needed to renovate and decarbonise the existing building stock which could lead to the creation of 160,000 new jobs.