In our article Earlier this week, in our discussion of the impact of PFAS and nitrogen in the construction sector, we looked at the forecasts of two major banks, ABN AMRO and ING. Yesterday, the EIB have published their market forecasts for the construction sector in 2020 and the coming years. Whilst ABN AMRO and ING remained cautiously optimistic, the EIB paints a different picture in the short term:
2019–2024
Over the past year, the construction sector has achieved substantial growth. Total construction output rose by 4% and, in absolute terms, increased by €3 billion to a level of approximately €74 billion. Employment also benefited from this. Non-residential construction in particular stood out, with growth of 7.5%. The EIB is less optimistic about 2020 and 2021: “As a result of the nitrogen issue, growth in the construction sector will level off in 2020 and 2021. New-build housing and infrastructure projects will be particularly hard hit”. The infrastructure sector is suffering most from the issues surrounding nitrogen and PFAS, but intensified efforts by central government may prevent output from declining even further. Non-residential construction output is performing relatively well within this context, but even here this will lead to no more than a stabilisation. New-build construction is under slight pressure, whilst renovation and maintenance are providing a counterbalance. Strong growth is expected again in 2022; in 2021, the order book will be replenished thanks to source-side measures and the granting and issuing of planning permission, and additional investments in sustainability will make a contribution. The EIB expects the construction sector to respond positively to the years 2020 and 2021. Thanks to strongly dynamic underlying demand and pent-up demand from previously delayed projects, construction output could see strong growth again in the period 2022–2024.
Despite the positive forecasts for the years after 2022, yesterday’s panel debate – featuring Hans de Boer (VNO-NCW), Job Dura (Dura Vermeer), Peter Glas (Delta Commissioner) and Marc van der Linden (Stedin Group), was nevertheless more subdued. The unanimous conclusion was that investment and production must be carried out in a structural, innovative and creative manner, in a predictable and transparent way, in order to achieve the best possible returns from the construction sector as a whole.
The fact that there is a slight dip in construction output in 2020 and 2021 does not mean that we are heading into a new crisis. Far from it, in fact; the long-term outlook is actually positive. Combined with sustained demand for capacity, the coming period promises to be an interesting and promising one in terms of acquisitions.
Are you curious to find out what market forecasts within the construction sector could mean for your business? If so, please feel free to contact Michiel Segers or Coen Peeters, consultants at VWG, with no obligation Corporate Finance.