Construction in France to contract 9.4% in 2020

The construction industry in France is expected to shrink by 9.4% in 2020, despite the fact the sector was exempt from the nationwide lockdown that began in mid-March due to the Covid-19 crisis.

“Despite the easing of the lockdown and the earlier step of exempting construction from these measures, construction activities have been disrupted due to the stringent measures taken by the government to contain the spread of the virus,” Danny Richards, lead economist at GlobalData, commented. ”Reflecting the disruptions, the French construction industry’s growth fell sharply by 14.1% in the first quarter of 2020.”

The government’s fiscal position is expected to worsen in 2020 due to the increase in government spending and lower economic growth. Consequently, the government may be constrained from investing in infrastructure projects in the long run once the virus outbreak subsides.

The French government had plans to upgrade the country’s infrastructure, with the planned extension of metro lines, road projects, and the building of new residential properties.

“The residential sector was the largest market in the French construction industry, but it was already expected to weaken in 2020 before the Covid-19 crisis, reflecting the declining trend in building permits in recent quarters,” Richards added. “Demand for housing is expected to slow significantly this year as unemployment increases and incomes are constrained.”

Projects appear to have been severely disrupted. Vinci, a major French contractor, halted projects temporarily in March and early April, but has since gradually restarted operations. The firm reportedly revealed the virus outbreak was having an adverse impact on business with many projects in France being put on hold, and it is expecting a significant decline in revenues over the coming months.

As recently as February, Vinci had reported results for 2019 showing revenue up 10%, including growth across its contracting businesses.

“The pandemic is having a significant impact on the activities of all Group business lines, in both Concessions and Contracting”, Xavier Huillard, Vinci’s Chairman and CEO, reported in April.