Construction in Europe: cities lead the way to recovery

Cities have been on the front line of the war against Covid-19. And they still are. These densely populated areas are hot spots for infections, and the virus spreads with greater speed. On the positive side, cities are equipped with healthcare systems that can respond more rapidly by receiving and treating the millions of sick people affected by the pandemic.

From an economic point of view as well, cities were the areas where daily life was most disrupted the virus, starting with the effects of lockdowns and social distancing. Stores, restaurants, shopping centres and all sorts of other economic activities were shuttered.

The transport system was impacted by the pandemic too, and so did public infrastructure in general.

Today, however, cities are the nerve center of the recovery, the places where the strength and vitality of renewal is being felt the most. Cities are the pulsating hubs where the future is now being written. The construction sector is part of this new future, and cities are now at the center of ambitious infrastructure projects in all sorts of fields, from buildings to sustainable mobility.

If cities are at the center of the global recovery, Europe is certainly one of the epicentres. Five European metropolises lead the ranking of the 100 most expensive cities in the world for the construction sector.
The 2021 edition of the International Construction Cost Index (IIC) published by Arcadis, a leading consulting firm in the construction sector, ranks Geneva, London, Copenhagen, Oslo and Zurich as the top five. These are the most expensive cities in the world to build in, ahead of New York City, San Francisco, Hong Kong, Dublin, Macau and Tokyo.

The reason? Partly it depends on the appreciation of the euro against the dollar in recent months, partly from the increase in the cost of raw materials, but also on the infrastructure vitality of some major European cities, London and Copenhagen above all. These cities have seen a building boom in recent years and have maintained very high standards of quality. In fact, the result is a snapshot of the vitality of the Old World’s cities, which have included the renewal of strategic infrastructure in their recipes for future economic growth.

City highways, subway lines, wastewater management plants, major real estate projects: Europe can become a new laboratory for ambitious projects. One such example is the Grand Paris Express, the gargantuan public transport network now under construction in Paris, which will help relaunch the continent in a sustainable way.

The European Union’s economy has been one of the worst-hit by the pandemic. According to Arcadis, in 2020 the average GDP of the member countries has contracted by 6.3%, a step backward that will now hopefully be recouped thanks to the €808 billion ($953 billion) Recovery Fund approved by the European Commission, which Arcadis said is expected to create an average GDP growth of 3.7% in 2021.

Green policies will be central to this recovery. The European Union calls for 37% of the funds to be spent on for “green transition” projects that mitigate climate change.  In addition, from January of this year, governments in the EU have to pass regulation forcing all new buildings to comply with Nearly-Zero Energy Buildings (nZEB), the new standard that aims to reduce carbon emissions as much as possible.

After an average contraction in the construction sector of 8% in 2020 due to Covid, Arcadis expects a recovery not before the end of 2022. Infrastructure, including those related to sustainable mobility and other green transformations, will thus become one of the engines of the continent’s rebirth.

The United Kingdom takes a page from Europe’s playbook

The UK has been hit harder by Covid-19 than the continent. The British economy posted a 10% contraction in GDP in 2020, said Arcadis, the worst figure among the G7 countries, because a large portion of its economy is made up of services and hospitality. However, the government expects a significant rebound of 7.3% already in 2021, which will be ensured — as seen elsewhere in Europe — by state investment plans.

In the infrastructure sector alone, the British government has announced plans to invest £100 billion over the next ten years — the right cure to recover from the construction crisis during Covid-19. In 2020, the sector’s turnover fell by 13%, and will only return to pre-Covid levels in 2022, according to Arcadis. Much will depend on London’s ability to start over, helped by new infrastructure projects in the “Build Back Better” investment plan launched by the government.