How Geopolitical Instability Is Affecting Europe’s Construction Sector

Rising energy prices and geopolitical instability are reshaping construction expectations across Europe 

Europe’s construction sector entered 2026 under growing geopolitical pressure. Ongoing instability linked to global conflicts, trade uncertainty, energy market volatility, and broader economic tensions is increasingly influencing how construction professionals view the near future. 

According to the latest European Architectural Barometer (EAB) Q1 2026, a clear majority of European architects expect rising energy prices and geopolitical instability to negatively influence construction projects during the next 12 months. Yet despite this uncertainty, the data also reveals something notable: the sector remains relatively resilient. 

The research, based on interviews with architects across eight European markets, shows that construction activity remains relatively resilient. Order books are still broadly stable, projects continue to move forward, and expectations for 2027 are already becoming more optimistic. 

European architects expect geopolitical pressure to affect construction activity 

The current geopolitical environment is clearly influencing sentiment across the European construction sector. Rising energy prices, global conflicts, and broader economic uncertainty are making architects increasingly cautious about the near-term outlook. According to the latest EAB results, 71% of European architects expect geopolitical instability and rising energy prices to negatively influence construction activity during the next 12 months. Nearly half (49%) expect a slight slowdown, while another 22% anticipate a stronger decline. However, these findings primarily reflect market sentiment rather than actual project disruption. 

Several underlying construction indicators remain relatively stable. Across many European markets, architects continue to report stable order books, while contractors and installers also indicate that workloads remain filled months ahead. In addition, the share of architects experiencing cancelled or postponed projects has not increased significantly in most countries. 

This suggests that although confidence has weakened, many projects continue to move forward for the time being. The concerns expressed by architects mainly relate to broader economic uncertainty, including: 

• volatility in energy prices, 

• supply chain instability, 

• rising financing costs, 

• weaker investor confidence, 

• geopolitical tensions surrounding Ukraine and global trade, 

• and uncertainty around future economic policy. 

For construction companies, developers, architects, and suppliers, this translates into a more cautious investment climate and increasing pressure on project feasibility. 

Rising material costs are now the industry’s biggest concern 

The EAB data shows that geopolitical instability is primarily being felt through cost pressure. 

By far the most commonly mentioned consequence is rising material costs. Across Europe, 70% of architects identify higher material prices as the main negative effect of geopolitical instability on the construction sector. This makes cost inflation the dominant challenge facing the market in 2026. 

Other frequently mentioned consequences include: 

• uncertainties around pricing and budgeting, 

• reduced investor confidence, 

• delayed projects, 

• cancelled projects, 

• shortages of raw materials, 

• and supply chain disruptions. 

What makes the current situation particularly difficult is the unpredictability of costs. Several markets report that calculating accurate and competitive offers has become increasingly complicated due to fluctuating prices for energy-intensive materials, logistics costs, and ongoing uncertainty around international trade. 

This pressure is especially visible in residential new-build projects, where margins are often already under strain due to financing costs and affordability issues. 

Yet projects are still moving forward 

Despite the geopolitical uncertainty, the European construction market is showing a surprising degree of resilience. 

Unlike during the financial crisis or the COVID-19 pandemic, the EAB data does not show a sharp collapse in project continuity. Across most countries, postponed projects are more common than outright cancellations. 

That distinction matters. 

It suggests that developers, investors, and public authorities are generally delaying decisions rather than abandoning projects altogether. In many markets, long-term demand fundamentals remain intact. 

Architects across Europe continue to report relatively stable order books, and the share expecting completely empty order books remains limited in most countries. 

Several structural drivers continue to support activity: 

• Europe’s ongoing housing shortage, 

• increasing renovation demand, 

• sustainability and energy-efficiency regulations, 

• public infrastructure investment, 

• and the long-term transition toward lower-carbon buildings. 

As a result, the market outlook for 2026 is cautious – but not catastrophic. 

A relatively flat 2026 for European construction 

The overall European construction market forecast for 2026 points toward stagnation or modest growth rather than a major downturn. 

The EAB forecasts show mixed but generally stable expectations across Europe: 

• Germany: -0.9% 

• Belgium: +0.6% 

• Poland: -0.4% 

• France: -0.4% 

• Italy: +1.0% 

• Netherlands: +2.0% 

• Spain: +2.5% 

• United Kingdom: +2.2% 

These figures underline the fragmented nature of the European market. 

Southern European markets such as Spain continue to outperform, supported by strong permit activity and continued investor confidence. The Netherlands also remains relatively resilient thanks to renovation demand and stable market fundamentals. 

Meanwhile, Germany, Belgium, France, and Poland continue to face greater pressure from weaker investor sentiment, slower permitting activity, and broader economic uncertainty. 

Still, even in the more challenging markets, the expected decline for 2026 remains relatively limited compared to previous crises. 

Why 2027 already looks more positive 

While 2026 is expected to remain challenging, the outlook for 2027 is considerably more optimistic. 

According to the EAB forecast, all eight European construction markets are expected to return to growth in 2027. 

Expected total output growth for 2027: 

• Belgium: +1.0% 

• France: +1.0% 

• Germany: +1.0% 

• Italy: +2.0% 

• Netherlands: +2.0% 

• Poland: +1.0% 

• Spain: +3.0% 

• United Kingdom: +2.0% 

This improving outlook is supported by several underlying trends. 

First, demand fundamentals remain strong. Europe continues to face major structural shortages in housing, skilled infrastructure, and sustainable building stock. 

Second, renovation activity remains comparatively stable across almost all markets. As governments continue pushing decarbonisation policies and energy-efficiency targets, renovation is increasingly becoming a stabilising force for the industry. 

Third, order books throughout the value chain remain healthier than many expected given the geopolitical backdrop. 

Finally, there is growing market expectation that once geopolitical tensions and energy volatility begin to stabilise, postponed investments and delayed projects will gradually return to the market. 

Final word 

Europe’s construction sector is entering a period defined by uncertainty – but also by resilience. 

Geopolitical instability, rising energy prices, and cost inflation are clearly slowing decision-making and increasing pressure across the market. Yet the underlying demand for housing, renovation, infrastructure, and sustainable buildings has not disappeared. In fact, many of these long-term challenges are becoming even more urgent. 

The latest EAB findings suggest that the industry is adapting rather than retreating. Projects are being delayed more often than cancelled, order books remain relatively stable, and confidence for 2027 is already improving across all surveyed countries. 

The message from the market is therefore nuanced: Europe’s construction industry is unlikely to escape geopolitical turbulence in the short term, but it also appears far better equipped to absorb uncertainty than during previous crises. 

Source: European Architectural Barometer Q1 2026