Fast Market Research

Market Report, "France Infrastructure Report Q3 2013", Published

New Construction research report from Business Monitor International is now available from Fast Market Research


Boston, MA -- (SBWIRE) -- 09/09/2013 -- Following negative growth in the construction industry in 2012, we forecast the recession to continue in 2013 and anticipate construction industry value to contract by 1.9% in real terms over 2013. The industry has been contracting consecutively for the past five years, from 2008 to 2012, when it experienced negative growth of -0.4%. At this point, we see little scope for a recovery as France's macroeconomic outlook remains bleak. Our Country Risk team is forecasting a contraction of -0.3% in GDP for 2013, which is a significant impediment to any recovery in the construction sector.

With the residential and non-residential construction sub-segment accounting for an estimated 82% of total construction industry value in 2013, it is unsurprising that the weaknesses in the housing sector are dampening growth in the industry. House prices in France reportedly dropped 1.7% y-o-y in 2012, marking the fastest decline since Q409, according to the French National Institute for Statistics and Economic Studies (INSEE).

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Our slight optimism for the French construction industry comes on the back of growth in the infrastructure industry, which we expect to outperform the overall construction sector. Buoyed by growth in the transport segment, we expect the share of infrastructure in the total value of the construction industry to increase from an estimated 18% in 2013 to 23% by 2022. This will lead to average annual real growth of 2.5% in the construction sector over the period.

The outlook for the industry is brighter in the long term, as the country's hosting of the UEFA Euro 2016 Football Championship will provide a very welcome source of new contracts for developers.

Key developments in the sector:

- The pace of concessions and project financing has slowed down significantly since 2011, though the award of the concession for the Marseille L2 by-pass in May 2013 indicates that the pipeline is still alive. This latest concession award encourages our view that France's infrastructure industry - and especially the transport sector - will buttress growth in the construction sector in the longer term.
- Three high-speed lines (LGV Sud Europe Atlantique, Contournement Nimes-Montpellier (CNM) and Bretagne-Pays de la Loire), costing a total of EUR29bn, will be a key thrust behind value creation for the French infrastructure sector. At a time when funding of projects is a key concern, the high-speed project connecting the cities of Le Mans and Rennes proved its worth in October 2012, when the European Investment Bank (EIB) signed the first instalment of EUR100mn (US$129.1mn) out of a total EUR300mn (US$387.4mn) loan to finance the project.

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