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Europe Construction Cost Book

Europe is projected to see 1.2% to 1.5% GDP growth in the 2nd half of 2017.  The European construction sector is expected to see nominal growth for the next two years.  Europe is still waiting to see what the Trump administration trade policies are & what impact they may have on European economies & their engineering / construction sectors.  The Trump election has certainly created a lot of uncertainty in the Eurozone & the rest of Europe.  The economic impact of “Brexit” is still being felt 18 months after the vote & the election of President Trump.  The Pound Sterling has dropped more than 10% against the US Dollar, the Euro has gained some strength in the last couple of months to 1.16 against the US Dollar as of (8/17/2017).  The jury is still out on “Brexit” – some experts believe it will positively impact the British construction industry, while there is another group that forecasts the opposite.

The European Union (EU), faces a lot of uncertainty after the Brexit vote.  It survived the Greek financial crisis back in 2013, however that problem seems to be back on the table, the (EU) is not likely to collapse in the next 12 to 24 months, nevertheless the internal tensions are increasing with some countries demanding a referendum on whether to stay or leave.  What will the (EU) look like in five years, will it grow and prosper or will it get smaller.

The German GDP growth is forecast to be 1.6% in the 2nd half of 2017, unemployment is currently 3.9%.  Germany’s Chancellor Angela Merkel is facing continued resistance to her migration policy, however despite this she has recently announced that she will seek a fourth term in 2017.  Germany is the largest economy in the Euro Zone, slow or marginal growth appears to be on the cards for the 2nd half of 2017, the issue of resettlement the 1.5+ million refugees from the Middle East & North Africa is still an ongoing issue.  German construction activity in the 2nd half of 2017 is expected to be slow.

The Eastern European construction sector will continue to be a depressed market, the continuing Ukrainian standoff is the main reason for this situation.  Economic growth in Italy, France, Spain, Sweden, Portugal & the Netherlands is projected to be flat for the remainder of 2017, as the Eurozone financial & political challenges continue.  The Euro is forecast to trade in the 1.10 to 1.18 to the US Dollar in the 2nd half of 2017.  The British economy & its’ construction sector has weathered the “Brexit” storm & is improving from its short post-Brexit dive.  The British housing market is now starting to trend upwards again as we move into the 2nd Q of 2017.

The High Speed Rail Link (HS2) between London & 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 3.2% range.  British Trade Unions are looking for increases in hourly wage rates of between 4% & 6% – if this happens look for inflation & construction cost  to start increasing in the 2nd half of 2017 & beyond.  The UK GDP is forecast to grow to 1.5% range in the 2nd half of 2017, the unemployment rate is improving, the current rate is 4.3%, and construction unemployment is higher at 5.2% to 6.4%.

France elected a new President – Emmanuel Macron, the French economy is forecast to grow by 1.5% for the 2nd half of 2017.  Lower energy costs are projected to uphold France on a moderate path forward to a slow economic recovery.  The construction sector continues to experience lackluster growth; however there are number of major infrastructure / transportation projects in the pipeline, unemployment in France is forecast to be in the 9% to 10% range in the 2nd half of 2017, with construction unemployment in the 14% to 16% range.

The other European economies such as Austria, Belgium, Greece, Italy, Finland, Latvia & Ireland remain slow-moving, with restrained growth & high unemployment rates.  The uncertainty in the Euro Zone (28 countries) continue to squeeze construction spending in the majority of the Western & Eastern European construction sectors.  The overall Euro GDP growth forecast for the 2nd half of 2017 is between 1.2% & 1.5% not very heartening going into 2018.

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