Western & Eastern Europe is forecast to see 1.3% to 2.3% GDP growth in the 3rd Q of 2026
Europe’s construction sector stands at a critical point, now there are 2 wars to contend with, one in Ukraine and one in the Middle East. These conflicts are causing major problems related to energy costs, supply chain issues and the general uncertainty that casts a shadow over the European construction sector.
Europe’s construction sector is starting to experience minimal growth of 1.1% for the first time in 3 years. The European Union (27 countries) will continue to experience minimal construction related growth, with a low GDP growth rate of 1.2% & 1.7%, inflation at 1.5% to 3.5% & a reasonably high construction unemployment rate of 6.4% to 7.3% as we move deeper into the 2nd half of 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 the 2nd half of 2026 as the economic consequences from the war in Ukraine grinds on & the ongoing Iran issue.
Nat Power & Tesla recently announced new battery storage capital projects valued at more $5 billion, that will be located in both Italy & the UK.
Sweden is constructing (3) 470 MW Small Modular Reactors (SMR) valued at $6 to 10 billion.
Numerous mega European infrastructure projects continue to face significant delays due to local permitting, public hearings and a plethora of government red tape.
Iran’s ability to fire 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 (4) big European countries, France, Germany, Italy and the UK construction sectors are still struggling to experience growth. It could be another 6 to 12 months before we see 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 can only make the problem more challenging. The UK’s Prime Minister resigned on 6/22/2026 mainly due to slow growth, immigration issues and the rising cost of living.
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 and the Iran conflict are resolved, it is difficult to see a change in the next 3 to 6 months.
UK construction activity dropped by 20% to 25% from 15 months back. 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. However, the forecast for construction is grim for most of the UK.
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 2.8% in 2nd half of 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 5 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. The French construction industry is projected to grow by 2.7% to 3.1% from 2025 levels, the French construction market is valued at $300 to $335 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 project connecting the island of Sicily to the Italian mainland.
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?
