But could there be light at the end of the tunnel? That’s what a forecast from Bain & Company suggests.

Three Wolff tower cranes helping to build the new head office for construction contractor Veidekke. The building should be ready for occupation in January 2025. Photo: Wolffkran

It’s new Building Blocks Construction Indicator suggested that Europe is poised for a gradual recovery beginning this year, based on robust demand for modernised infrastructure, sustainable offices and residential development.

Bain & Company said that construction businesses have been hit by a “perfect storm� in 2023 and 2024, as high inflation costs in both labour and materials, coupled with supply chain constraints, have conspired to strangle demand.

But it has forecast that the worst of the headwinds will start to abate, laying the groundwork for a slow recovery.

The strongest overall growth is expected to come in the Nordic countries, with a compound annual growth rate (CAGR) over the 2025-27 period of between 3% and 5%.

Not far behind, and in spite of gloomy news about the weakness of the pound and high borrowing costs, the UK is expected to follow with a CAGR of 2% to 4% over the same period.

France is forecast to see 1.5% to 3.5% over that time, with 1%-3% in Italy, and a lower growth rate of 0.5% to 2.5% in Germany.

Pent-up demand

Adrien Bron, partner in Bain & Company’s Infrastructure, Construction and Building Products practice, said, “In the current European construction landscape, talking about growth is almost taboo these days. Yet we see positive prospects for several construction sectors across Europe, developing over the next two to three years, and expect recovery in most construction market segments after the perfect storm the industry experienced over the past two years or more.

“The construction recovery will be fuelled by structural pent-up demand from the protracted period of declining activity as well as structural long-term drivers of demand from continuing urbanisation, requirements for more affordable housing and more sustainable, efficient offices, and the ongoing need for investment in infrastructure renewal and modernisation.�

Bain & Company said that national budget commitments across countries for spending on ageing infrastructure, as well as modernisation of Europe’s energy grids, and development of new fibre optic networks would underpin growth.

Infrastructure construction activity in 2025-2027 is expected to grow at a CAGR of 2.5% to 4.5% in Italy as well as the Nordics, by 2% to 4% in the UK, by 1.5%-3.5% in Germany, and by 0.5-2.5% in France.

Meanwhile, office construction will receive a boost from new sustainability standards. Office construction activity in 2025-2027 is expected to see CAGR of 2.5% to 4.5% in the Nordics, 1.5% to 3.5% in the UK, 1% to 3% in both Germany and Italy, and 0.5% to 2.5% in France.

And Bain & Company forecast a broad recovering in residential new construction, which has been hampered by rising prices and high borrowing costs, even in the face of strong demand. CAGR in the Nordics is forecast at 6.5% to 8.5% over the 2025-2027 period. Growth in France is also expected to be strong, at 5% to 7%.

UK growth is forecast to be 3% to 5% over the period. But Germany is projected to see a slower upturn in activity with growth of 0%-2% while in Italy this sector is expected to see further contraction of up to 2%, following a boom in 2020 to 2022.