Western and Eastern Europe are forecast to see GDP growth of 1.1% to 2.1% in the 4thquarter of 2026.
The European countries experiencing nominal construction-related growth include Ireland, Poland, Romania, Bulgaria, Spain, and Portugal. For the most part, the 44 European construction sectors will experience subdued growth in the 4th quarter.
Europe’s Big Four economies—Germany, the UK, France, and Italy—continue to experience extremely slow construction growth to negative growth.
Europe’s construction sector stands at a critical point. There are now two wars to contend with, one in Ukraine and one in Iran. 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.
The European Union (27 countries) will continue to experience minimal construction-related growth, with a low GDP growth rate of 1.2% to 1.7%, inflation at 1.5% to 3.3%, and a reasonably high construction unemployment rate of 5.3% to 7.1% as we move into the 4th quarter of 2026.
Sweden is constructing three 470 MW Small Modular Reactors (SMRs), valued at $6 billion to $10 billion, which is positive news for the nuclear energy sector. Numerous mega European infrastructure projects continue to face significant delays due to local permitting, public hearings, and a plethora of government red tape.
UK construction activity has dropped by 20% or more from 18 months ago. Construction activity in the UK is seeing a minor improvement, especially in the London area, in office / administrative construction, together with some roadworks, rail upgrades, power projects (nuclear facilities), dock / jetty refurbishments, and warehouse / logistics facilities as we move further into 2026. However, the forecast for construction is grim for most of the UK.
The German construction industry continues to be in decline, a trend that has gone on for close to five years. Lackluster demand, high interest rates, the ongoing struggle between Russia and Ukraine, and now the Iran situation are the issues overshadowing the German construction sector. Germany continues to be the major economy in the EU. The hope that newly elected Chancellor Merz will perk up the economy and construction sector does not appear to be working; recent elections could be a problem for the new Chancellor. Germany’s construction market is estimated at $350 billion to $400 billion in2026.
The French construction sector continues to be somewhat downcast, as it has been since COVID, more than four to five years ago. High unemployment, especially in the construction sector, currently in the 8% to 11% range, restrained demand, high interest rates, and the ongoing conflicts between Russia and Ukraine and now Iran are the issues impacting the French construction sector. The French construction industry is projected to grow by 2.5% to 2.9% from 2025 levels. The French construction market is valued at $300 billion to $335 billion.
The Italian construction industry is experiencing a modest uptick in construction activity, although it still has a long way to go to recapture the status it had a decade or two ago. The big news is the approval of the 2.2-mile Strait of Messina Suspension Bridge, a $15+ billion project connecting the island of Sicily to the Italian mainland.
The main question for European construction sectors is: How long will the Iran conflict last, and will it drive up inflation in the next three to six months and cause a global recession?
