OSLO, NORWAY: Veidekke’s forecasts for the next two years point to a more muted construction market. In general, transport and construction activities are expected to remain at a high level, but private and commercial construction is expected to decline. The water, sewerage and energy market segments are expected to increase significantly going forward.

Following a record 2022 and very high activity over several years, Veidekke is expecting the construction and civil engineering market volume to drop by 3% in 2023 and 1 % in 2024. The forecasts represent Veidekke’s best judgment based on current market assumptions, and changes in international financial and commodity markets may affect both the content and the direction of the forecasts.

“Overall, construction and civil engineering activity has remained at a very high level over several years, so a decline should not come as a big surprise, and especially in a global situation characterised by uncertainty,” says Kristoffer Eide Hoen, head of business development and analysis at Veidekke.

In the transport market, activity is expected to remain high over the next couple of years. Norwegian authorities have signalled cuts in transport budgets, but it is still uncertain what this entails in practice. A slight drop in the ambitions of Nye Veier and the Norwegian Public Roads Administration is as expected, but a full stop would result in major efficiency losses in ongoing and imminently upcoming projects, which would probably be a price too high to pay.

In Sweden, the new national plan for transport infrastructure that was passed in June, incorporates major railway investments, including high-speed railway lines between the big cities. With regard to roads, the operation and maintenance of existing Swedish roads are prioritised at the cost of new road construction.

If brakes are applied in the transport segments, activities there may be replaced by increased investments in water, sewerage and energy, which can make use of the same expertise and resources over time. There is a great need for new infrastructure and improvement of older plants in these segments, and both total volumes and the share of large projects have shown strong growth over a period of time.

Current trends indicate continued growth and stipulate that, over a period of one to two decades, water, sewerage and energy may amount to volumes and significance equal to what transport has accounted for in recent years.

In certain regions of both Norway and Sweden, construction activity has been unusually high over some time. Veidekke believes activity will continue at a high level in the coming years, although interest rate hikes and economic uncertainty are expected to dampen the demand for residential and other private construction.

Construction costs are now more stable and predictable, after taking big leaps during last autumn and the spring of this year. This autumn, costs are expected to remain at the current level or drop moderately, although the price of certain energy-intensive products may continue to rise.

“With regard to costs, we may be over the worst. But with the current geopolitical and climate-related challenges, we have to acknowledge that the global situation is less predictable. A return to the relatively stable conditions we had become accustomed to, is at best an uncertain proposition, whether we are discussing prices, or supplier value chains”, says Kristoffer Eide Hoen.