Fast Market Research

Market Report, "France Infrastructure Report Q4 2013", Published

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


Boston, MA -- (SBWIRE) -- 11/18/2013 -- We continue to forecast that France's construction industry value will contract by 1.9% in real terms over 2013. This is supported by official data that indicated the industry registered negative growth of 2.5% in H113. The industry has been contracting consecutively for the past five years and we expect the recession to continue through to 2013 as we see little scope for a recovery in France's macroeconomic outlook. Our Country Risk team is forecasting a contraction of 0.3% in real GDP growth for 2013, which will be a significant impediment to any recovery in the construction sector. We are, however, more optimistic for 2014 when we expect positive growth to return to the construction industry - at 1.5% y-o-y.

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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).

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 2.4% 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 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.
- Furtheremore, the EIB has approved a EUR300mn loan to partly finance the upgrade of the Lille metro system. Thirty years after it was opened, Lille's metro will benefit from the modernisation of its driving system in addition to the purchase of new trains and equipment. This is part of a EUR610mn project to double public transport capacity by 2020.

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