General Cable, the leading international cable sector company, has just presented a study titled “Construction in Spain. 2009 and forecast for 2010”, produced together with the consultancy firm D’Aleph. The study analyses the behaviour of such a significant sector for the electrical material industry and trade over the past year and indicates the main trends for the current year in terms of residential building and non-residential building, refurbishment and maintenance.  The information included in the study also individually analyses the evolution of the sector in each of the autonomous communities of Spain.

Its 112 pages describe the research work into the construction market that General Cable has been carrying out for 15 years, offering information of great interest to professionals just at a time when the Spanish economy is suffering the effects of a financial crisis closely related to the negative evolution of the building sector over recent years.  As is well known, the electrical material industry and distribution are extremely sensitive to construction market fluctuations, which is why the monitoring of its variables is essential for professionals.  Along these lines, General Cable wishes to provide its clients with further added value by offering them information of great interest.

Negative evolution

The study indicates that the construction market recorded negative figures in Spain during 2009, with a 11.2% drop due to the significant retraction of residential building (-24.7%) and the scarce contribution of civil engineering as a compensatory market (1.8%), the slight growth of which was due to the start of plans involving the State Fund for Local Investment, which meant a good injection into local economies, along with a large amount of activity regarding road and rail infrastructures.

There is other data to support the difficult situation of the construction sector in Spain. One of these is the fact that the active population employed in the sector stood at 1,802,700 people by late 2009, a loss of 614,600 jobs in the sector, making it the sector with the highest volume of job losses in the country.  The latest data available on official tenders also continues to indicate a drop (-1.7%) during February 2009-January 2010. Furthermore, cement consumption during 2009 fell by a significant 33%.

Residential building fell by 24.7% over the year as a result of the low rate of new projects started.  The number of residential project permits stood at 146,640, down 51% in comparison with 2008 and 56.5% in comparison with 2007. It was the lowest number of new homes over the past two decades, partly explained by the large number of homes for which permits were granted over previous years but for which building had not yet started or that had not been finished.  

Signs of recovery

The forecast for the current year points to the start of a slight recovery in the Spanish residential market as of the second half.  The volume of activity could stand at around 120,000 new homes by the year end, although this will not prevent a drop in the volume of production of around 10-15%. On all accounts, the authors of the study indicate that we will have to wait and see the direction of the Spanish economy in order to ascertain whether residential building is actually starting to change trend.

In terms of the non-residential market, the forecast for this year continues to give negative figures, although with a more moderate retraction (around -5%). This market will not record positive activity rates until the economy as a whole has recovered, as this will encourage an increase in the construction of buildings for productive use.  Although the non-residential building segment involving facilities or public uses has grown positively, this will not offset the significant drop in investment in productive or commercial buildings.

The great potential of refurbishment

Insofar as the refurbishment and restoration of buildings, this market felt a minor squeeze in terms of turnover (-1%) during 2009. This construction activity currently represents 15% of the sector in Spain, whereas in other countries the percentage accounts for 50% of the total.  For every four new homes for which building permission is granted, only one is refurbished or restored, although the weight of refurbishment has increased significantly as a result of the financial crisis. 

There are a total of almost 25 million homes in Spain, around a sixth of which were built before the 50s and another significant part during the 60s and early 70s. As a result, a great many homes require refurbishment or improvements.  If at least 5% of all property were refurbished every year or were improvements made to homes at least every 20 years, one million homes a year could be refurbished.

It must also be noted that there are more than 700,000 non-residential buildings that are also due for refurbishment or restoration, either due to their age (some have been standing for more than 30 years), wear and tear or the need to adapt them to new uses or current regulations.  The forecast for the current year indicates an increase in this market, although this might not lead to increased turnover due to the great opacity associated to the refurbishment sub-market, which is often submerged in the underground economy.            

General Cable, supporting the professional channel

Through this study on the construction sector, General Cable aims to contribute towards the debate on the strategies to follow to improve the activity of the electrical material market in Spain over forthcoming years in line with the company policy to support projects that seek to provide added value to the professional channel.