Kalkine: FTSE350 Construction Sector Sees Revenue Stabilisation in 2025

Highlights

• German construction revenue projected to grow modestly in 2025 following a prior year’s decline

• Sector recovery supported by cautious optimism amid ongoing challenges in real estate

• Construction firms connected to FTSE350 index monitor broader European activity trends

The construction sector in Germany, part of the broader industrial ecosystem, is expected to experience slight revenue improvement in 2025. This follows a subdued performance in the previous year, as noted by the BVB construction association. The industry’s modest gain is viewed in the context of stabilisation efforts across the European construction market, which remains under pressure from lingering challenges in the real estate segment.

Sector Background and Market Dynamics

The construction industry plays a central role within Germany’s economy, often reflecting broader shifts across European infrastructure demand and property market trends. After a downturn in 2024, sector participants are observing marginal gains as part of a wider effort to regain lost momentum. The BVB group, which represents construction stakeholders, noted a cautious recovery as activity resumes across key project areas.

A renewed focus on both public and private development projects has supported ongoing activity across urban and commercial hubs. Construction cranes and projects lining city skylines are slowly regaining their pace, with firms adjusting operations and budgets following a challenging year.

Implications for Broader European Markets

Construction activity in Germany has wider implications for related markets, including the United Kingdom. Companies listed in the FTSE350 index, such as CRH plc (LON:CRH), Balfour Beatty plc (LON:BBY), and Kier Group plc (LON:KIE), monitor such developments due to cross-border supply chains and shared sectoral dynamics. Although these companies are based in the UK, shifts in European project demand and labour availability continue to influence their strategic planning.

Additionally, demand for construction materials and regulatory compliance within Germany can impact procurement timelines and cost assessments for FTSE350 construction constituents. While the UK sector operates under distinct legislative frameworks, similarities in challenges such as labour shortages and building approvals make Germany’s performance relevant to broader investor sentiment and industrial planning.

Real Estate Sector Recovery Remains a Key Factor

A critical component in the construction industry's outlook is the trajectory of the real estate sector. The German property market faced its steepest disruption in years, which contributed to the downturn seen in the previous year. High costs, reduced demand, and limited financing options for residential and commercial builds were among the primary challenges that affected progress.

While a return to expansive growth has yet to materialise, indications of stabilisation are evident as developers revisit project pipelines. The pace of recovery remains linked to regulatory clarity, planning permissions, and evolving demand patterns.

Labour and Cost Dynamics Continue to Influence Output

Input costs and labour availability continue to be major factors shaping construction performance. In recent periods, firms across the sector have faced tight labour markets and supply-side disruptions that limited their ability to meet timelines and budget targets. Despite ongoing adjustments, these concerns remain prevalent in 2025, prompting companies to adopt revised staffing strategies and procurement arrangements.

Some firms are turning to modular construction methods and digital planning tools to streamline execution, while also prioritising domestic sourcing where feasible. These practices are aimed at increasing productivity amid a landscape of sustained constraints.

Outlook Aligned with Gradual Sector Normalisation

Although the German construction sector is not showing signs of rapid expansion, the transition from contraction to modest growth marks a shift toward normalisation. Companies active in this space are managing expectations while focusing on execution quality and project sustainability.

The broader industrial environment, including energy efficiency mandates and urban development priorities, continues to influence project viability and funding access. For UK-listed construction players within the FTSE350, developments in Germany remain relevant due to overlapping trends and shared supply chain pressures.