Spain leads stronger construction markets as European growth remains subdued

Europe’s construction industry is facing another subdued year, with high financing costs, expensive materials and weak housing economics continuing to restrain activity. Spain is among the stronger performers, while infrastructure, renewable energy and railway projects are providing some support across the continent.

European construction growth remains under pressure

Europe’s construction sector is expected to remain subdued in 2026, with sharp differences between national markets as high financing costs and weak housing economics restrain activity.

EU construction output is forecast to grow just 0.5 per cent this year. Infrastructure investment, energy projects and Germany’s gradual recovery are providing support, but residential building remains under pressure from borrowing costs, expensive materials and economic uncertainty.

Spain construction output forecast to rise 3%

Spain is among the stronger performers. Construction output is forecast to rise 3 per cent in 2026 after recovering from a fall of more than 25 per cent between 2019 and 2022. Housing permits nearly tripled between 2020 and 2024, although momentum is now easing, with permits falling almost 2 per cent in the second quarter. Spain also faces greater exposure to sudden cost increases because public contracts generally lack price-adjustment mechanisms.

France contracts as Germany returns to growth

Elsewhere, France is expected to contract 2.5 per cent this year, while Germany is forecast to return to growth after five consecutive years of decline. Poland is expected to remain broadly flat before improving in 2027.

The UK is not included in the EU-specific forecasts in the research, so no comparable British construction growth figure is provided.

Infrastructure provides strongest support across Europe

Across Europe, infrastructure remains the sector’s strongest support.

Energy construction continues to benefit from renewable power and electricity-grid investment, while railway projects include high-speed investment in Spain and Portugal. Housing recovery looks slower, with EU building permits stabilising after rising around 15 per cent between summer 2024 and the end of 2025, across many major urban markets.