EUROPEAN UNION

Overall construction activity

For the year 2023 as a whole, real GDP in the European Union increased by 0.4%, weaker growth than projected (+0.8%). The Euro area also recorded real growth of 0.4%.Employment as a whole also increased slightly, growing by 0.3% in the final quarter of 2023. 

The construction sector in Europe, which has proved more resilient than other sectors in previous economic downturns, is expected to contract by 2.3% in 2024. Total investment in construction started to slow down in 2022, contracting by 0.3% last year.

Looking at individual Member States, the picture is bleak across most of Europe, with the construction sector in most countries experiencing either weak growth or contraction. The largest decrease is observed in Bulgaria (-9.8%), with countries such as Sweden also significantly affected (-5.6%).In the case of Sweden, this is mainly due to the ongoing crisis in housing construction.

On the other hand, Greece has  seen the highest growth in 2023 (+21.2%), partly due to the implementation of projects under its Recovery and Resilience Plan. It is expected that the construction sector will continue to grow and be able to support its financing needs once the package of ongoing projects is completed.  Strong growth was also recorded in the Czech Republic (+8.2%) and Lithuania (+11.9%).

Projections for 2024 are rather pessimistic across most of Europe.  Italy is expected to experience the largest decline (-7.4%).The sector is also expected to contract in France (-4.5) and Germany (2.7).  However, it is expected that some of the countries will see growth in 2024.  The construction sector in Bulgaria is expected to expand by 19.6% this year, reversing three consecutive years of contraction. 

In terms of employment, the sector employed 12,3 million workers in 2023, an increase of 1,1% compared to 2022.  However, the housing crisis has contributed to a decline in the number of people in employment in some countries.

Housebuilding

New housebuilding represents 19,9% of the total investment in construction. The main concern 

for the construction sector last year was the crisis in this  segment. In 2023, new housebuilding is expected to have fallenby 6.2%, and by 8.6% in 2024. For housebuilding asa whole (including renovation), the figures are -2.9% and -5.8% for 2023 and 2024 respectively.

Sweden is the country withhit the hardest, registering a decline of 37.2% in new residential construction last year. Government measures have proved insufficient and ineffective to combat the crisis in residential construction and small companies in this segment are failing.In addition, many companies are moving to other segments. A similar situation can be observed in Finland, where the segment shrank by 36% last year and the number of residential permits fell by 50%.

In countries such as Denmark (-13.8%) and France (-8.0%), the current outlook is worrying.  Italy and Spain proved more resilient, with growth of 1.3% and 2.1% respectively.

Rehabilitation/Maintenance

Investment in renovation represents 30,3% 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 declined by 0.9%in 2023.

Renovation has the potential of becoming a substantial driver of growth for the construction sector in the longer term as the renovation of buildings is being put at the heart of European and national climate policies.

In the short term, it could act as a counterbalance to new residential construction, as demand for renovation and maintenance and government support for sustainability measures could make this segment less vulnerable to economic cycles.  The figures suggest that renovation mitigated the decline in residential construction. However, this statement should be taken with a pinch of salt, as companies operating in both (sub)segments are not necessarily the same.