Boston, MA -- (ReleaseWire) -- 05/26/2014 -- After six years of consecutive negative growth, we expect the French construction industry to return to low, but positive growth in 2014, as our 0.5% forecast indicates. Our fundamental view remains unchanged, as we believe that while the worst is over for the industry, a strong rebound is off the cards. Our view aligns with our Country Risk forecast for economic growth which expects a moderate recovery of 0.7% real GDP growth in 2014. We expect transport infrastructure projects to lead this timid recovery over the next decade, with more sustainable growth necessitating a wide range of structural reforms.
Our slight optimism for the French construction industry comes on the back of growth in the infrastructure industry, which we expect to outperform the overall construction sector. Buoyed by growth in the transport segment, we expect the share of infrastructure in the total value of the construction industry to increase from an 18.1% in 2014 to nearly 20% by 2023. This will lead to average annual real growth of 1.9% in the construction sector over the period.
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Key Trends And Developments
- In October 2013, the French Ministry of Ecology, Sustainable Development & Energy signed a Public- Private Partnership (PPP) agreement with a consortium led by Bouygues Construction to build the new Marseille L2 bypass. The 30-year contract will include the financing, design, construction, maintenance and restoration of the bypass. The project entails investment of about EUR620mn and is expected to last more than four years and is set to be handed over in October 2017.
- The A-335 western Strasbourg bypass was re-launched by the French Ministry of Transport. This 55-year concession involves the design, financing, construction, operation and maintenance of a 24km section of the motorway. This scheme allows the country to develop its infrastructure without exerting too much pressure on the already-fragile government finances. We expect to see strong interest in this EUR475mn contract from France's main construction players - Vinci, Bouygues and Eiffage. The contract is scheduled to be signed in 2015 in order to reach completion by 2020.
- In addition, three teams have been short-listed for the A45 motorway concession in central France. As expected Vinci, Bouygues and Eiffage are the three companies competing for this project. Similar to the A-335 Strasbourg west bypass, this project was inactive for more than two years. This EUR1.3bn project involves the construction of a second carriageway, four tunnels and 11 viaducts.
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