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STATE OF PLAY - FORECASTS FOR EUROPEAN CONSTRUCTION STATE OF PLAY - FORECASTS FOR EUROPEAN CONSTRUCTION Michael Weingrtler michael.weingaertler@euroconstruct.org European Builders Confederation Annual Meeting 2014 20 June 2014 - Palermo, Italy

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OVERVIEW Macro-economic Framework Overall Trends in Construction Construction Outlook by Sectors Housing Non-residential construction Civil Engineering

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EUROCONSTRUCT NETWORK EUROPE (EC-19) Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Nether-lands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Czech & Slovak Republic, Hungary, Poland. BIG 5 Countries France, Germany, Italy, Spain, United Kingdom Northern Europe Norway, Sweden, Finland, Denmark, Ireland Smaller European Countries Austria, Belgium, Netherlands, Portugal, Switzerland Eastern Europe Czech Republic, Hungary, Slovak Republic, Poland ES FR PT IR UK FI SE NO DE PL DK AT HU CH CZ SK IT NL BE

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DOUBLE DIP IN CONSTRUCTION Source: EUROCONSTRUCT (Oslo 6/2014).

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WHAT HAPPENED? (1) INCREASING WORLD TRADE (2) DYNAMIC EXPORTS (3) MACHINERY INVESTMENTS (4) CONSTRUCTION INVESTMENTS EUROPEAN PUBLIC DEBT CRISIS

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THREE STEPS OF ECONOMIC RECOVERY 2008200920102011201220132014 GDP0.3 4.12.21.8 0.20.21.7 Exports1.4 11.210.56.22.51.34.1 Fixed Capital Investment 0.9 12.00.62.1 2.3 1.73.1 Private Consumption0.21.21.40.5 0.40.21.4 Public Consumption2.3 0.90.0 0.60.7 Construction 3.9 9.0 3.40.2 5.5 2.71.3 Investments Consumption World Trade Exports Construction Time lag 2-4 quarters 2-4 quarters Source: EUROCONSTRUCT (OSLO 6/2014).

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HOW WILL IT GO ON? Source: EUROCONSTRUCT (Oslo 6/2014).

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EUROPEAN CONSTRUCTION 2014 low volume high volume decreasing activity low volume high volume Volume: construction output per capita in mill. Euro (horizontal axis) Activity: real annual average growth 2014 in % (vertical axis) average volume average growth increasing activity decreasing activity increasing activity Source: EUROCONSTRUCT (Oslo 6/2014).

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RENOVATION DOMINATES WESTERN CIVIL ENGINEERING & NON-RESIDENTIAL EASTERN EUROPE 21% 18% 22% 30% 16% BUILDING RENOVATION 550 bill. 16% 32% 45% NEW HOUSING 218 bill. NEW NON- RESIDENTIAL 196 bill. TOTAL CIVIL ENGINEERING 263 bill. NEW HOUSING 11 Mrd. NEW NON- RESIDENTIAL 21 bill. EC-15 EC-4 BUILDING RENOVATION 15 bill. TOTAL CIVIL ENGINEERING 22 bill. Source: EUROCONSTRUCT (Oslo 6/2014). Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic. European Construction A 1.30 bn Euro Market (2013)

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SLOW RECOVERY IN CONSTRUCTION Source: EUROCONSTRUCT (Oslo 6/2014. Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic. gdp and construction output index 2010 = 100 without Poland

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SLOW RECOVERY IN CONSTRUCTION Source: EUROCONSTRUCT (Oslo, 2014). Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland. gdp and construction output index 2010 = 100

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RECOVERY OF NEW HOUSING IN EUROPE NEW HOUSING TOTAL HOUSING RENOVATION Source: EUROCONSTRUCT (Oslo 6/2014). housing output index 2013 = 100

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LONG TERM HOUSING IN EC-19 total housing output in billion Euro at 2013 prices 25 % + 6% Source: EUROCONSTRUCT (Oslo 6/2014).

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BACK TO 2010 total housing output in billion Euro at 2013 prices Source: EUROCONSTRUCT (Oslo 6/2014).

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TOTAL HOUSING IN BIG-5 COUNTRIES volume change in billion Euro Source: EUROCONSTRUCT (Oslo 6/2014).

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HOUSING TRENDS NORTHERN EUROPE 28 % + 16% total housing output in billion Euro at 2013 prices Source: EUROCONSTRUCT (Oslo 6/2014). Northern Europe: Denmark, Finland, Ireland, Norway, Sweden.

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TOTAL HOUSING IN NORTHERN EUROPEAN COUNTRIES Volume change in billion Euro Source: EUROCONSTRUCT (Oslo 6/2014).

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HOUSING TRENDS - Smaller Countries 11 % + 4% Source: EUROCONSTRUCT (Oslo 6/2014). Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland. total housing output in billion Euro at 2012 prices

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TOTAL HOUSING - SMALLER COUNTRIES volume change in billion Euro Source: EUROCONSTRUCT (Oslo 6/2014).

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HOUSING TRENDS EASTERN EUROPE 24 % + 9% Source: EUROCONSTRUCT (6/2014). Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic. total housing output in billion Euro at 2012 prices

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TOTAL HOUSING EASTERN EUROPE volume change in billion Euro Source: EUROCONSTRUCT (Oslo 6/2014).

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2 & less Portugal Spain Hungary 2 < 3 Netherlands Germany Slovakia Denmark UK, Italy Ireland 3 < 4 Sweden Czech Republic 4 < 5 Belgium Finland Poland 5 & more Austria Norway France Finland Switzerland SIGNIFICANT GROWTH DIFFERENCES average housing permits per 1000 inhabitants 2013-2016 3.5 permits per 1,000 inhabitants Source: EUROCONSTRUCT (Oslo 6/2014).

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RENOVATION DOMINATES HOUSING OUTPUT IN WESTERN EUROPE Housing Renovation New Housing share of new construction and renovation in european housing markets in 2013 in % Source: EUROCONSTRUCT (Oslo 6/2014).

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PUBLIC RENOVATION MEASURES AS REACTION TO THE LONG TERM ENERGY PRICE TREND S: TECSON (www.tecson.de) 2004/05 +45% 2009/10 +30% 2003 vs 2012 +430% Oil-Crisis Crude oil price trend 1960 2013 EU Public Debt Crisis World Financial Crisis

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TOTAL HOUSING PRODUCTION ES FR PT IR UK FI SE NO DE PL DK AT HU CH CZ SK IT NL BE average growth 2013-2016: 2.0% 4% and above 2% to less than 4% 1% to less than 2% below 1% shrinking market Western Europe: 2.0% Eastern Europe: 2.8% Source: EUROCONSTRUCT (Oslo 6/2014).

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MINOR RECOVERY IN EUROPEAN NON-RESIDENTIAL CONSTRUCTION non-residential construction output index 2013 = 100 Source: EUROCONSTRUCT (Oslo 6/2014).

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BEST OUTLOOK: NEW INDUSTRIAL CONSTRUCTION Source: EUROCONSTRUCT (Oslo 6/2014). new non-residential construction output index 2013 = 100

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POOR NON-RESIDENTIAL PERFORMANCE Poland, excluded gdp & non-residential construction Output index 2010 = 100 Source: EUROCONSTRUCT (Oslo 6/2014). Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

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BIG-5 EUROPEAN COUNTRIES MINOR GROWTH IN NON-RES. CONSTRUCTION Germany United Kingdom Italy France Spain BIG-5 new non-residential construction output index 2013=100 Source: EUROCONSTRUCT (Oslo 6/2014).

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NORTHERN COUNTRIES average growth 2013-2016: +2.6% Denmark Ireland Finland Sweden Norway new non-residential construction output index 2013=100 Source: EUROCONSTRUCT (Oslo 6/2014).

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SMALLER WESTERN EUROPEAN COUNTRIES average growth 2013-2016: +1.0% Netherlands Austria Switzerland, Belgium Portugal new non-residential construction output index 2013=100 Source: EUROCONSTRUCT (Oslo 6/2014).

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CENTRAL EASTERN EUROPEAN COUNTRIES average growth 2013-2016: +2.5% Hungary Poland Czech Republic Slovak Republic new non-residential construction output index 2013=100 Source: EUROCONSTRUCT (Oslo 6/2014).

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NON-RESIDENTIAL OUTLOOK ES FR PT IR UK FI SE NO DE PL DK AT HU CH CZ SK IT NL BE average growth 2013-2016: 1.2% 3% and above 1.2% to less than 3% 0.6% to less than 1.2% below 0.6% shrinking market Western Europe: 1.1% Eastern Europe: 2.6% Source: EUROCONSTRUCT (Oslo 6/2014).

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CIVIL ENGINEERING OUTLOOK gdp and civil engineering output index 2010 = 100 Poland, excluded Source: EUROCONSTRUCT (Oslo 6/2014). Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

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CIVIL ENGINEERING OUTLOOK gdp and civil engineering output index 2010 = 100 Source: EUROCONSTRUCT (Oslo 6/2014). Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland.

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ROAD SECTOR DOMINATES CE ENERGY 40 bn. STRUCTURE IN CIVIL ENGINEERING PRODUCTION OUTPUT 2013 ROADS 84 bn. RAILWAY 42 bn. EC-19EC-4 OTHER TRAFFIC 20 bn. ROADS 9 bn. RAILWAY 3 bn. TELECOM & OTHER CE 2 bn. OTHER TRAFFIC 1 bn. WATER 31 bn. ENERGY 3 bn. WATER 4 bn. TELECOM & OTHER CE 43 bn. Source: EUROCONSTRUCT (Oslo, 6/2013).

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ENERGY SECTOR AS GROWTH DRIVER total civil engineering output index 2010 = 100 Source: EUROCONSTRUCT (Oslo 6/2014).

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CIVIL ENGINEERING OUTLOOK IN BIG-5 EUROPEAN COUNTRIES total civil engineering output index 2013 = 100 Source: EUROCONSTRUCT (Oslo 6/2014).

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CIVIL ENGINEERING OUTLOOK ES FR PT IR UK FI SE NO DE PL DK AT HU CH CZ SK IT NL BE average growth 2013-2016: 1.5% 4.2% and above 2% to less than 4.2% 0.5% to less than 2% below 0.5% shrinking market Western Europe: 1.3% Eastern Europe: 4.5% Source: EUROCONSTRUCT (Oslo 6/2014).

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SUMMARY Economic recovery is mainly driving European Housing Civil Engineering HIGHEST RISK SLOW AND UNSTABLE OVERALL ECONOMIC DEVELOPMENT