The European construction industry, having enjoyed several good years, is now headed for a slump likely to last until 2010, a leading German think-tank said Tuesday.
Following significant growth in construction activity in the past two years, "a perceptible weakening will likely mark the European building sector up to 2010," the Munich-based Ifo economic research institute said in a statement.
After construction expanded by around 2.5 percent per year between 2005-2007, "yearly growth of only 0.5 percent is expected" for 2008-2010, Ifo said.
Last year, the construction industry in the 19 European countries studied was worth 1.5 trillion euros (2.4 trillion dollars).
Ifo's report was based on the results of a conference of the Euroconstruct business research group, which polled affiliated associations in nations from Finland and Norway to Italy, Portugal and Switzerland.
Germany represented the single biggest construction market, with 16.9 percent of the total, followed by Spain, Britain and France.
Infrastructure investment was expected to compensate in part for falling housing markets in countries like Britain, Ireland and Spain, while eastern Europe was also tipped to keep activity moving forward, Ifo said.
The Spanish market was forecast to contract by 18 percent this year and by 16 percent in 2009, the study found.
Reflecting the growing problems in the industry, British home builder Persimmon said Tuesday it expected job cuts to rise to about 1,100 from the start of the year as it battled a downturn in the housing market.
"The first six months of this year have undoubtedly been the most challenging period in Persimmon's recent history," the group said in a statement to the London Stock Exchange.
The news came a week after Taylor Wimpey, the biggest home builder in Britain, said it was axing 900 British jobs because of the weak housing market.
In Germany, Ifo's construction specialist Ludwig Dorffmeister said: "For 2008 we expect a slight decline in construction measures in Western Europe while the Eastern European states still remain on an expansion course."
The institute said weaker economic and financial activity following the US subprime home loan crisis and "rising mortgage interest rates and banks' stricter lending conditions are having a negative impact on construction demand."
In the 19 countries covered, almost one half of all activity concerned home construction, followed by non-residential building and civil engineering.
Renovation and modernisation of existing buildings also gained in importance to represent 43 percent of the total volume, with construction of new buildings and structures accounting for about 57 percent, Ifo said.
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