Western Mainland Europe Construction Market Report 1Q 2023
Spain
Gross domestic product and inflation
At the end of last year, Spain produced the best annual gross domestic product (GDP) growth rate since 2000 (5.5%), despite suffering secondary effects of the energy crisis. The Office for Economic Co-operation (OECD) maintains a 2023 forecast of 1.3% GDP growth.
During 2022, inflation peaked at 10.8% in July and dropped to 5.7% in December. Similar to other western European countries, Spain’s inflation has increased during the first two months of this year, reported at 6.1% in February. The OECD anticipates inflation to drop to 3.6% by the next quarter.
Construction materials
The Spanish Chamber of Commerce reports decreases in corrugated steel pricing. Prices are now 96% above those seen in 4Q 2019, a welcome change from the peak (183%) reached in April 2022.
It is possible that the energy price control mechanisms introduced in October have led to reductions in the industrial price index, such as those seen for wood, steel profiles, structural metals and electrical distribution. The energy price caps are expected to continue to the end of 2023.
Despite decreasing rebar pricing, overall structural costs are increasing due to concrete production carbon credits and higher production and transportation costs. Gleeds Ibérica is advising to allow for increased structural costs as the country continues to prefer concrete over steel frame construction.
Market outlook
For the first time in twelve months, the construction confidence indicator in January reached a negative figure (-10.6) but jumped to 11.2 in February, largely attributed to renewed optimism in work expectations during the next three months and decreased price volatility. Keeping in mind a continuing decline in construction volume, it is no surprise contractors are readily available to tender work and negotiate contract conditions.
Investor interest declined in 4Q 2022 but has since recovered, as Spain continues to demonstrate economic stability despite global pressures.
Spain’s EU Recovery and Resilience Plan allots €7.3 billion (more than 10% of the total package) for infrastructure investment in renewable energy sources and energy efficiency in residential renovations. Perhaps more encouraging is €2 billion of investment for reskilling and upskilling the labour force needed to deliver construction-driven initiatives.
As always, Gleeds advises regular programme and budget updates that take into account local risk factors which may impact project performance. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
Puerto Venecia, Zaragoza, Spain — Gleeds provided Project Management
Quantity Surveying/Cost Management services.
