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Europe

Europe Construction Cost Book

Construction activity is starting to pick up in a few countries in Western Europe, these include, Portugal, Belgium, Ireland and Netherlands. Much of the future growth will be enhanced by the improving economies and increased government spending on public facilities and infrastructure projects. European economies, for the most part, appear to be improving as we transition into the 2nd half of 2018, at least half a dozen countries are starting to see positive signs of growth for the first time in more than eight years. The Euro Zone is projected to see 1.9% to 2.2% GDP growth in the 2nd half of 2018, the European construction sector is expected to see slow to moderate growth for the next two years.

The economic impact and uncertainty of “Brexit” is still being experienced in the UK, the Pound Sterling has dropped more than 10% against the USA Dollar in the last two years, the British economy and its construction sector has weathered the “Brexit” storm and is improving from its short post-Brexit dive. The British housing market is now starting to trend upwards again as we move into the 1st Q of 2018. The jury is still out on “Brexit” – some experts believe it will positively impact the UK construction industry, while there is another group that forecasts the opposite. The High Speed Rail Link (HS2) between London and Birmingham (150 km costing $5 billion) is officially a “go”, this four year project is projected to employ as many as 10,000 construction related jobs. Construction costs in the Britain are moving upwards again in the 2.5% to 3.5% range. British Trade Unions are looking for increases in hourly wage rates of between 4% and 6% – if this happens look for inflation and construction cost  to start increasing in the 1st half of 2018 and beyond.

The UK GDP is forecast to grow to 1.5% range in the 2nd half of 2018, the unemployment rate is improving, the current rate is 4.3%, and construction unemployment is higher at 5.1% to 6.3%. Inflation is projected to be in the 2.4% to 2.6% range by the end of 2018.

The German GDP growth is forecast to be 2.4% by the end of 2018, unemployment is currently 3.5%.  Inflation is low at 1.8%. Germany is the largest economy in the Euro Zone, slow and steady growth appears to be on the cards for the 2nd half of 2018, and German construction activity in the 2nd half of 2018 is expected to moderately improve over 2017 levels.

The French economy is forecast to grow by 1.9% for the 2nd half of 2018. Lower energy costs are projected to uphold France on a moderate path forward to a slow economic recovery. The construction sector continues to experience minimal growth; there are a number of major infrastructure / transportation projects in the pipeline, unemployment in France is forecast to be in the 8.5% to 8.9% range in the 2nd half of 2018, with construction escalation in the 1.6% to 1.9% range.

Economic growth and construction activity in the Netherlands, Belgium, Hungary, Denmark, Czech Republic and Sweden is projected to start moving slowly ahead in the 2nd half of 2018. The Euro is forecast to trade in the 1.10 to 1.20 to the US Dollar in the 2nd half of 2018. The Eastern European construction sector that includes Hungary, Latvia, Estonia, Poland and Romania is starting to see nominal growth of 1.8% to 2.5% as we move into the 2nd half of 2018. The other European economies such as Austria, Greece, Finland, Lithuania and Switzerland remain somewhat slow-moving, with restrained or limited growth and high unemployment rates. There remains uncertainty on the direction and intent of Italy and some the Eastern European countries such as Hungary and Bulgaria. The Euro Zone (28 countries) continue to squeeze construction spending in the majority of the Western and Eastern European construction sectors. Spanish EPC firms have been successful in wining major infrastructure and petro-chemical in the Middle East.



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