Western & Eastern Europe are forecast to see 1.3% to 2.4% GDP growth in the 2nd Q of 2026
Europe’s construction sector stands at a critical pivot point, there are now 2 wars to contend with, one in Ukraine and one in the Middle East. Iran’s ability to fire 2 # 3,000-mile range missiles at the UK - USA military base in Diego Garcia in the Indian Ocean also gives Iran the ability to target some major cities in Europe including Rome, Paris, Berlin and London.
The European construction industry will see a restrained recovery in 2026. GDP growth is estimated to be 1.5% to 2.7% range in 2026. Some countries such as Poland, Ireland, Spain and Hungary are performing rather well as we transition further into 2026. The (4) big European countries, France, Germany, Italy and the UK’s construction sectors are still struggling to experience growth, it could be another 6 to 12 months before these changes. The main issues for these counties are the ongoing war between Russia and Ukraine and the continuing number of immigrants entering each country. The Iran conflict only makes the problem more challenging.
An uninspiring economic situation does not inspire major & mid-sized companies, contractors & vendors to spend / invest funds on expansion plans. The best strategy is to wait it out & hope that the economic situation improves. Until the Russia vs. Ukraine conflict is resolved, it is difficult to see a change in the current situation.
The UK construction activity dropped by 20% to 25% from 12 months back, not a great start to 2026. Construction activity in the UK is seeing a minor improvement (especially in the London area) in office / admin type construction, together with some roadworks, rail upgrades, power (nuclear type facilities), docks / jetty refurbishments & warehouse / logistics facilities as we move further into 2026. The UK Government has recently announced plans to engineer & build a new nuclear power plant in Sizewell Suffolk, in eastern England & in north Wales that will cost between $15 & $20 billion. These power plants will generate more than 3 GW of electrical power & will utilize the design of the ongoing Hinkley Point C nuclear power plant located in Somerset in southern England that is currently being built & is approximately 40% complete, employing more than 25,000 people. This is a huge shot in the arm for the UK construction sector that has been struggling for the best part of 3 years.
The German construction industry continues to be in a decline that has gone on for close to 5 years. Lackluster demand, high interest rates & the ongoing struggle between Russia & Ukraine and now the Iran situation are the issues overshadowing the German construction sector. Germany continues to be the major economy in the EU. Economic activity in Germany is expected to increase by 1.5% to 3.1% in 2026. Germany still has a long recovery journey ahead. The hope is that the newly elected Chancellor Metz will perk up the economy & construction sector in the next 3 to 6 months. Germany’s construction market is estimated to be $350 to $400 billion in 2026.
The French construction sector continues to be somewhat downcast, as it has since COVID, more than 4 years back. High unemployment, especially in the construction sector (currently in the 8% to 11% range) is very high, restrained demand, high interest rates & the ongoing conflict between Russia & Ukraine and now Iran are the issues impacting the French construction sector. Latest feedback from France is that the Construction Industry should see a small uptick in construction activity in 2026. France’s leadership continuing to pursue safe & sustained nuclear energy / engineering & construction knowledge plays a crucial role in Europe’s calling for clean energy & zero carbon emissions. The French construction industry is projected to grow by 2.7% to 3% from 2025 levels. The French construction market is valued at $300 to $325 billion.
The Italian construction industry is experiencing a modest uptick in construction activity, still a long way to go to recapture its status / standing it had a decade or two back. The big news is the approval of 2.2 miles Strait of Messina Suspension Bridge, a $15+ billion connecting the island of Sicily to the Italian mainland.
The European Union (27 countries) will continue to experience minimal construction related growth, with a low GDP growth rate of 1.2% & 1.7%, with inflation at 1.5% to 1.9% & a reasonably high construction unemployment rate of 6.4% to 7.1% as we move deeper into 2026.
A couple of countries such as Poland, Portugal, Norway and the Netherlands are starting to see increased opportunities, but for the most part the rest of Europe will see slow growth in 2026 as the economic consequences from the war in Ukraine grinds on. The main question for European country’s construction sectors is: How long will the Iran conflict last and will it drive up inflation in the next 3 to 6 months and cause a Global Recession?
