The Western European construction market registered a negative compound annual growth rate (CAGR) of -5.94% over the past four years, largely as a result of the slowing down of the region's economies following the financial crisis and the region's debt troubles.
Western Europe experienced a severe financial crisis during 2008-2009 with economic activity in the region contracting sharply.
Reflecting ongoing weakness in the region, real GDP has yet to rise above the pre-2008 level, with ongoing debt problems in most countries constraining growth, particularly in Greece, Ireland, Spain and Portugal.
Sovereign debt crises and the uncertainty in the Eurozone are continuing to constrain construction spending growth in many Western European markets. Only the Scandinavian counties are likely to be largely immune from the impacts. Infrastructure construction is expected to see declines through to 2015 with only limited growth forecast in both non-residential and residential construction spending.
Austerity measures in many Western European countries have focused on the postponement/cancellation of many planned infrastructure projects.
Residential construction constituted the largest market in the construction industry, accounting for a 46.9% share of industry output in 2012. The residential construction market experienced a housing price boom before the financial crisis, driven by strong economic and income growth, low interest rates and increased competition among banks with regard to supplying credit.
Property prices in general across the region fell sharply in 2008 and 2009 with, at best, gradual recoveries since then contributing to a still subdued property market.
The fastest growing countries in Western Europe in 2012 are expected to be Germany (+1.8%) and the U.K. (+1.6%). Ireland, Spain, Portugal, Italy and Greece are likely to experience continuing declines in construction spending through to 2015, with little optimism about growth later in the decade. Indeed through to 2015, their share of the Western European market is expected to decline significantly (by as much as 10%) while growth in the remaining countries remains largely stagnant.
Broadly speaking, construction spending in Western Europe is likely to remain stagnant for most of the decade with little or no growth expected. Indeed, construction spending growth will be significantly lower in Western Europe than for the rest of the world. It is likely that it will be 2020 before the market in Western Europe returns to output levels last seen in 2007.
For more information on the Western European construction market, see the latest research: Western European Construction Market
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