EUROPEAN UNION

Overall construction activity

In 2024, GDP grew by 1.0% in the European Union and by 0.9% in the euro area, following a growth rate of 0.4% in both zones in 2023. The strongest increases were recorded in Ireland (+3.6%), Denmark (+1.6%), and Portugal (+1.5%). In contrast, the most notable declines were observed in Malta (–0.7%), Austria (–0.4%), and both Germany and Finland (–0.2%). Employment also recorded a modest increase: +0.8% in the EU and +0.9% in the euro area.

In the construction sector, after the post-Covid rebound that began in 2021, momentum has slowed significantly. Construction investment fell by over 2% in the EU in 2024, marking a clear reversal after two years of modest growth. Forecasts for 2025 point to a further, albeit more moderate, contraction, with no clear signs of recovery. These averages, however, mask significant regional disparities.

In Western Europe, the three largest economies on the continent—typically drivers of the sector—all show a negative trend. In France, after near stagnation in 2023 with a slight decline of 0.3%, activity is expected to contract by 3.9% in 2024. The 2025 forecast of –2.5% offers little hope for a swift recovery. In Germany, the sector remains hampered by a prolonged decline in new housing construction, which began as early as 2021. Even smaller markets, such as Belgium and Austria, are struggling, with 2025 forecasts of –0.4% and 0%, respectively.

Conversely, several Southern European countries maintain a generally positive outlook despite economic uncertainties. Spain continues to post moderate yet steady growth, with +2.3% in 2024 and +3.2% expected in 2025, driven by EU recovery funds and renewed interest in energy renovation. Portugal follows a similar path, with +1.1% growth this year and an expected acceleration to +4.0% in 2025. Greece is seeing particularly strong growth, close to +10% per year in both 2024 and 2025, supported by EU funding and large infrastructure modernization projects. Italy, however, despite its geographical proximity, is experiencing a sharp downturn. After several years of expansion—partly driven by the generous “superbonus” tax incentive—growth has collapsed, with a 5.3% drop in 2024 and a further 7% decline expected in 2025.

It is worth noting that despite broad access to EU recovery funds, economic outcomes remain highly uneven across Southern Member States. This demonstrates that European support alone is not sufficient to ensure sustained growth in the construction sector and that national political, administrative, and economic conditions strongly influence investment dynamics.

In Northern Europe, the trend remains negative in 2024, but 2025 forecasts are more optimistic, suggesting a moderate recovery. Denmark, down 7.7% this year, is expected to rebound by 3.5% next year. Finland, with a 5.8% decline, could recover by 3.4%, while Sweden, after a smaller drop of 1.1%, is projected to grow by 2.8%. In Central and Eastern Europe, Romania stands out with a moderate decline of 3% in 2024, followed by a remarkable expected increase of 21% in 2025, likely due to the launch of EU co-financed projects. Bulgaria, showing strong growth this year (+13.9ƒ%), is expected to slow slightly in 2025 (–1.4%).

The current contraction in the sector is due to a combination of structural factors. Higher interest rates are restricting access to credit, limiting private investment. At the same time, the gradual phase-out of public support—particularly from the EU recovery plan—has removed a major growth driver. Finally, high construction costs and administrative delays are significantly slowing project implementation.

The overall decline expected in 2024 and 2025 reflects a transitional period for the European construction sector. While some countries—such as Greece, Romania, and Spain—manage to maintain momentum through EU funds, the continent’s major economies appear to be more durably weakened.

Housebuilding

The contraction in construction investment is largely driven by the downturn in the residential housing segment, which is particularly sensitive to rising interest rates and the gradual withdrawal of public support schemes. In 2024, activity in this segment is expected to fall by 7.7% across the EU, with a further 3.9% decline forecast for 2025. This is the most severely affected segment. The decline is widespread but especially sharp in countries like Italy, Denmark, and Sweden, all of which are seeing double-digit decreases. Conversely, some markets—particularly in Spain and Greece—remain more resilient.

Contrary to expectations, the renovation market has not been able to offset this decline. It too is showing signs of slowing down at the EU level, raising concerns about Europe’s ability to meet its climate goals, particularly in terms of building energy efficiency as defined in the Paris Agreement.