There is no escaping the fact that the European construction market is in for a hard 2024. Anaemic GDP growth, high interest rates and persistent high inflation mean that housebuilding is slowing down across the continent, and some civil engineering projects are being slowed or delayed as costs spiral. Furthermore, industry investment in new factories and facilities will likely slow too as economic output remains sluggish across much of Europe.
Since the Ukraine conflict began, confidence in future orders has ebbed away across Europe. High interest rates are curbing consumer demand for housing and businesses are putting investment decisions on hold, as 2024 shapes up to be a weak year for growth. Although construction equipment companies have been able to fulfil backorders and build up inventories at dealers, that opportunity is passing quickly and it is now increasingly clear demand for new equipment will cool across Europe in 2024.
By almost any measure you could choose, both confidence and orders in the UK construction market are evaporating. In the UK, new orders are showing signs of falling across almost all construction industry sectors.
New private housing, new infrastructure and new private industrial orders have all declined in recent months, falling from a high experienced after the Covid-19 pandemic. Furthermore, deliveries of bricks in the UK – a leading indicator for performance in the housing sector – have slumped to below pre-pandemic levels.
As with other countries in Europe, increases in the UK’s central bank interest rate intended to tackle rampant inflation have made mortgages less affordable and put growing pressure on household finances. This has had a chilling effect on the UK housing market, with many housebuilders pausing completions as demand for new-builds dries up. To indicate the scale of the problem, mortgage arrears have moved from a fairly stable 0.9% of total loan balances to 1.1% in the first half of 2023, with the trajectory worsening.
While infrastructure projects such as HS2 have allowed the UK to maintain growth for infrastructure projects in recent years, there is evidence that spiraling materials costs are pushing the UK government to scale back and delay certain roadbuilding and infrastructure projects. This will have a negative impact on the construction equipment market, particularly the heavy-duty earthmoving sector.
As with other European countries, rising interest rates are starting to put a dampener on the housing market in France. However, as can be seen from the overall construction climate index and the expected activity for non-residential buildings, the outlook is brighter with a more gradual decline and some indication that the outlook is stabilizing. There is strong construction activity around the Paris Olympics in 2024 and the Grand Paris Express metro expansion.
As with other European countries, Germany is grappling with high inflation and increasing interest rates. In the past two years, order books have remained strong for builders, particularly for housing. However, as can be seen from new building permit data, demand has started to slide and it is clear that the residential sector will slow in 2024 as work on current projects ends and is not replaced with new volume.
Germany’s traditionally strong manufacturing economy is likely to struggle in 2024 as new orders decline through the end of 2023. Many manufacturers are already warning about lower growth through 2024 and this will be reflected in a reduction in spending on new facilities.
Selling machinery in a down market is always a challenge. However, one of the major challenges for machinery fleets at the moment is dealing with inflationary cost pressures. A focus on selling machinery and products that help cut fuel costs or speed up project tasks will be warmly received and may be a key differentiator at the point of sale. Machine builders and component suppliers should not hesitate to invest in marketing and activities centered around products that can demonstrate a clear reduction in OPEX.
Another way in which manufacturers and dealers may weather the worst of 2024 is to concentrate on service and maintenance sales. Machinery always needs servicing and, if end users are not upgrading their equipment, now is the perfect time to stress the importance of servicing and maintaining equipment (particularly older equipment) in order to reduce downtime and maximize the performance of existing assets.
A beacon of innovation
The European construction machinery manufacturing sector remains as a beacon of innovation, sustainability, and global influence in the industry. With a rich history dating back decades, Europe has consistently been at the forefront of producing state-of-the-art construction equipment that not only meets the evolving demands of the construction sector but also addresses pressing environmental concerns.
European construction machinery manufacturers have earned a reputation for excellence, driven by a commitment to quality, precision engineering, and cutting-edge technology. These companies have a history of producing a diverse range of equipment, including excavators, bulldozers, loaders, cranes, and more, designed to meet the unique challenges posed by various construction projects.
Innovation is the lifeblood of the European construction machinery industry. European manufacturers invest heavily in research and development to introduce groundbreaking technologies and features that enhance efficiency, safety, and sustainability. From autonomous construction equipment to telematics systems that improve machine performance and reduce downtime, European companies are driving innovation on a global scale.
One notable innovation is the integration of electric and hybrid technology into construction machinery. As sustainability takes center stage, European manufacturers have been quick to respond with eco-friendly solutions. Electric excavators, loaders, and compact equipment have emerged, offering reduced emissions and quieter operation, contributing to cleaner construction sites. Sustainability has also become a key focus for European construction machinery manufacturers. These companies recognise their role in reducing the environmental footprint of construction projects. Efforts to improve fuel efficiency, reduce emissions, and utilize alternative fuels are evident in their product offerings.
In addition to greener equipment, manufacturers are embracing sustainable manufacturing practices. They are incorporating recycled materials into their machines, optimizing energy usage in production facilities, and implementing eco-friendly design principles to minimize waste.
The impact of European construction machinery manufacturers extends far beyond the continent’s borders. These companies have a global presence, exporting their machinery to construction markets worldwide. Their commitment to quality and innovation has made European construction equipment highly sought after in regions spanning North America, Asia, Africa, and beyond.
Furthermore, European manufacturers play a significant role in shaping international industry standards and regulations. They collaborate with organizations and governments to establish guidelines that prioritise safety, environmental responsibility, and the overall well-being of construction workers.
While the European construction machinery manufacturing sector enjoys a strong position globally, it faces challenges such as increasing competition from emerging markets and the need to adapt to rapidly changing technological landscapes. However, these challenges also present opportunities for further growth and innovation. European manufacturers are well-positioned to lead the way in developing new technologies, expanding their sustainability efforts, and creating solutions for the construction industry’s evolving needs. They can leverage their legacy of excellence to remain competitive on the global stage.
