The European construction sector is headed for a sharp slowdown likely to last until 2010, a leading German think-tank said Tuesday. "After a clear growth in construction activity in the past two years, a perceptible weakening will likely mark the European building sector up to 2010," the Munich-based Ifo economic research institute said in a statement.
After the volume of construction expanded by around 2.5 percent each year between 2005-2007, "yearly growth of only 0.5 percent is expected" for 2008-2010, Ifo said. Its report was based on the results of a conference of the Euroconstruct business research group, which represents 19 European countries from Finland and Norway to Italy, Switzerland and Portugal.
Infrastructure investment was expected to compensate in part for falling housing markets in countries like Britain, Ireland and Spain however, while eastern Europe was also tipped to keep activity moving forward, Ifo said. British home builder Persimmon said Tuesday it expected job cuts to rise to about 1,100 from the start of the year as it battled a downturn in that country's housing market.
"The first six months of this year have undoubtedly been the most challenging period in Persimmon's recent history," the group said in a statement to the London Stock Exchange. The news came a week after Taylor Wimpey, the biggest home builder in Britain, said it was axing 900 British jobs because of the weak housing market.
In Germany, Ifo's construction specialist Ludwig Dorffmeister said: "For 2008 we expect a slight decline in construction measures in Western Europe, while the Eastern European states still remain on an expansion course."
The institute said weaker economic and financial activity following the US subprime real-estate crisis and "rising mortgage interest rates and banks' stricter lending conditions are having a negative impact on construction demand."
Last year, the volume of European construction in the 19 countries exceeded 1.5 trillion euros (2.4 trillion dollars), with almost one-half represented by home construction, followed by non-residential construction and civil engineering.
Renovation and modernisation of existing buildings also gained in importance to represent 43 percent of the total volume, with construction of new buildings and structures accounting for about 57 percent, Ifo said.
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