| Ramzi Chamat
Switzerland's construction sector, traditionally a pillar of economic stability, experienced a notable slowdown in the first quarter of 2023. This development reflects significant challenges facing the sector, including a decline in orders and revenues.
At the start of 2023, the Swiss construction sector showed signs of slowing down. A detailed analysis of the first quarter's data highlights worrying trends that could impact the country's overall economy.
The first quarter of 2023 marked a challenging period for the Swiss construction sector, characterized by a significant decrease in orders. This 8.1% drop, affecting both building and civil engineering, indicates a general slowdown in these areas. This regression has direct implications on the sector's overall workload, as evidenced by a slight decrease in work reserves. This situation could result from various factors, including reduced investor confidence or changes in financing and investment policies. This slowdown in orders reflects a trend of caution in the sector, possibly influenced by economic uncertainties or adjustments in public policies. The decrease in orders impacts the entire construction value chain, affecting not only large construction firms but also many subcontractors, suppliers, and independent workers who depend on the sector's strength.
A 3.1% reduction in revenues in the Swiss construction sector underscores a significant economic challenge. This decline is mainly attributable to a setback in the public sector, which plays a crucial role in initiating and financing many construction projects. This decline could result from budget cuts, reevaluation of governmental priorities, or a more cautious approach to public spending in an uncertain economic context. Nevertheless, ongoing projects offer a glimmer of hope for the sector. Once launched or completed, these projects could stimulate a rebound in revenues. Their successful completion could not only offset current losses but also reenergize the market by attracting new investments and strengthening market players' confidence.
For the current and following year, activity forecasts in the Swiss construction sector remain moderate. This anticipation is mainly due to an overall weaker demand, which could be influenced by various economic and social factors. Moreover, the increase in interest rates makes financing construction projects more expensive, possibly deterring new investments. Concurrently, escalating construction costs, driven by higher prices for materials and labor, add extra pressure on construction companies' margins, thereby reducing their capacity to undertake new projects. These conditions suggest a period of slowed growth and consolidation for the sector.
A 5% decrease in construction permit applications for housing is a concerning indicator for the Swiss residential construction sector. This trend suggests a continuing slowdown in this segment, possibly due to a less favorable economic situation, diminished confidence among real estate developers, or factors such as stricter regulations or environmental challenges. Such a decline could have long-term implications on housing supply, thus affecting the entire real estate market.
The Swiss construction sector, facing a notable slowdown at the beginning of 2023, is confronted with multiple and complex challenges. The decrease in orders and revenues, moderate activity expected for the coming years, and a reduction in construction permit applications for housing paint a picture of caution and readjustment. However, it is important to note that, despite these challenges, opportunities exist, particularly through ongoing projects that could revitalize the sector. Resilience and adaptability will be crucial for the players in the Swiss construction industry to navigate this changing environment.