News report: European recovery in international work

The value of work carried out by European contractors working outside their domestic national markets increased +10.8% last year to € 156.4 billion (US$ 203 billion), according to data from European International Contractors (EIC), a trade association. However, new orders won by this group of 200 or so companies fell -1.1% to € 169.4 billion (US$ 220 billion).

In terms of revenues, other markets in Europe made a major contribution to international revenues last year. Other countries in the region have always been the biggest source of overseas work for European contractors, and last year was no exception, with € 73.4 billion (US$ 95 billion) worth of work carried out. This was a +13% increase on the previous year, and meant that Europe accounted for 47.5% of the group’s total overseas revenues.

It is also interesting to note that this was the first time since 2007 that the proportion of revenues from Europe had increased. In 2007, other markets in Europe accounted for 53.3% of international revenues, but from then until 2010, that proportion had declined (although the absolute value of work had risen) due to higher growth in other markets.

The increase in European revenues also meant a slight change in a trend towards working in developing markets seen over the last few years. In 2003 the revenue split between developed and emerging markets was about 76:24. However, since then there has been a move towards contractors earning a greater proportion of their international revenues in less developed parts of the world. By 2010 the proportion stood at about 60:40.

However, last year’s surge in work in Europe saw that split swing marginally back towards developed regions for the first time in eight years, even if it was only by a fraction of a percentage point.
The second largest region for European contractors working overseas was Asia and Oceania last year, where revenues totalled € 27.2 billion (US$ 35 billion), or 17.8% of the total.

This figure was up +12.6% on the 2010 total of € 24.2 billion (US$ 31 billion).

Next on the list of major markets was the US and Canada, where revenues rose +4.6% last year to € 20.4 billion (US$ 27 billion). Revenues were also up +2.1% to € 13.3 billion (US$ 17 billion) in Africa among European contractors, while the Middle Eastern market for this group fell -1.9% to
€ 11.4 billion (US$ 15 billion).

The surprise in the revenue figures was Latin America, the smallest overseas market for European contractors. Here revenues were up just under +40% to € 9.7 billion (US$ 13 billion) last year.

Although this meant Latin America still represented the smallest slice of international revenues for European contractors – just 6.2% of the total – fairly steady growth over the last seven years has seen this market increase in significance. In 2005 it represented only 3.0% of total revenues.

New contracts

In contrast to the growth in revenues earned overseas by European contractors last year, the value of new contracts won fell -1.1% to € 169.4 billion (US$ 220 billion).

As was the case with revenues, one of the most significant factors in the new work position was the European market. There was a remarkable +18.1% surge in orders from Europe, taking the total to € 76.9 billion (US$ 100 billion), almost the same as the record of € 77.9 billion (US$ 101 billion) which was set at the peak of the pre-crisis boom in 2008.

In terms of the proportion of new contract wins last year, Europe accounted for 45.3% of the total, a striking increase from the 38% share Europe claimed in 2010.

The other region to show a significant surge in new orders last year was Latin America, where the value of incoming work increased +43.8% to € 16.2 billion (US$ 21 billion). This meant that Latin America accounted for 9.6% of new contracts won last year, an increase from 6.6% in 2010, which saw it overtake both Africa and the Middle East.

European contractors saw a downturn in new contract wins in all other regions of the world last year. The smallest decline was in the US and Canada, where a -3.7% fall saw the value of work won drop to € 21.6 billion (US$ 28 billion).

More significant in both percentage and absolute terms was the -18.8% fall in work won in Asia and Oceania, which saw the value of orders won in this region drop to € 29.1 billion (US$ 38 billion) last year, compared to € 35.9 billion (US$ 46.7 billion) in 2011.

There were also striking falls in the value of work won in both Africa and the Middle East last year, although losses in these smaller markets had a less profound impact on the overall picture. African orders were down from € 20.3 billion (US$ 26 billion) in 2010 to € 13.9 billion (US$ 18 billion) last year, a -31.2% decrease.

Similarly, the value of new work won in the Middle East dropped from € 15.5 billion (US$ 20 billion) in 2010 to € 11.6 billion (US$ 15 billion) last year – a -25.3% decrease.

This meant the Middle East represented just 6.9% of all new international contracts won by European contractors last year, the lowest this proportion has been since 2004. Africa meanwhile represented 8.2% of work won, the lowest proportion since 2007.

Changing emphasis?

The increase in work carried out in Europe last year, combined with the impressive surge in new contracts could point to a reversal in the trend towards emerging markets that has been seen over the last seven to eight years. In the early part of the 2000s the split between developed and emerging markets was around 75:25 for both revenues and new contract wins.

The following years saw a steady move towards emerging markets, with the most striking indication coming in 2010, when the balance of new work won was split almost 50:50 between developed and emerging countries. The surge in work won in Europe last year has pushed that proportion back to about 58:42.

And within the developing markets there is a clear change in emphasis. Latin America is emerging as a more and more important region for European contractors. On the strength of new contract wins in 2011, it is now perhaps more significant than either Africa or the Middle East, although there is obvious danger in taking one year’s results in isolation and calling them a trend.

Another clear trend is the gradual slide of the US and Canada in terms of their relative importance as overseas markets for European contractors. The proportions of 13.0% revenues and 12.7% of the value of new contracts won last year are the smallest North America has had in more than ten years. Contrast this with the situation in 2002, when the region represented more than a quarter of the revenues achieved overseas by European contractors.

Indeed, the € 20.2 billion (US$ 26 billion) of work carried out in North America last year is almost identical to the figure seen in 2002, and the high point in 2008 was only marginally higher at € 21.5 billion (US$ 28 billion). Against this backdrop of a flat market, the total value of international work carried out by Europeans has risen from € 78.7 billion (US$ 102 billion) in 2002 to this year’s total of € 156.4 billion (US$ 203 billion).

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