The construction industry in France is expected to shrink by 9.4% in 2020, according to GlobalData, a leading data and analytics company. This is despite the fact that the construction sector was exempted from the nationwide lockdown that had been in place since mid-March.
Danny Richards, lead economist at GlobalData commented: “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. 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.
Richards adds: “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. 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 revealed that 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.