Construction companies see clear signs recovery is well under way

Photo: Kristýna Maková

Czech construction companies believe they have emerged from the worst and are looking for confirmation in 2015 that this is the case. Although some companies in the slimmed down sector say they are operating at near capacity, they argue that more could be done to speed up the throughput of public tenders.

Photo: Kristýna Maková
The Czech construction sector appears to have emerged from its extended recession with some companies now saying they are operating at full capacity and are recruiting sub-contractors to cover some of the demand.

The optimistic state of the hardest hit sector during the recent downturn comes from the latest quarterly survey release at the start of October. It is based on interviews with the biggest building companies, investors, and firms charged with preparing and piloting projects.

The headline finding from the CEEC Research/KPMG survey is that between January and July construction companies saw growth of an average 3.7% in their business. The biggest growth came from civil engineering projects with a 6.6% advance compared with the same period in 2013 whereas structural engineering projects witnessed growth of 2,5%. Overall, construction companies expect the sector to expand by 3.4% this year and by 2.7% in 2015.

One of the clearest signs of the ongoing expansion is the value of tenders being put out for bids by public authorities - the state accounts for around 30-40% of economic activity in the construction sector. Planned investments in the pipeline are up by almost 53%, at just over 81 billion crowns, compared with the first seven months of 2013. And the volume of specific contracts already received by companies up till July is just over a third higher than the corresponding period last year.

But companies complain that many building projects decided on are still experiencing delay before the work is finally shared out between contractors and say more could be done to speed up the throughput of work. That demand is coming in particular from structural engineering projects, including office and house construction, where private investment plays a greater role and where the recovery has been weaker.

Thirty-six percent of construction companies already say they have more orders than last year with the proportion of firms declaring they have fewer on a continued slide - that situation is now being faced by just over once company in five.

Nearly nine out of 10 bosses of companies putting together construction projects expect the sector to stabilize or grow with the throughput of new projects expected to rise by 2.9% this year and by 3.7% in 2015.

And construction companies now say they are working at near maximum with an average 88% of capacity now being used. That is the highest figure since the peak of the last Czech economic boom at the start of 2008 when the figure reached 89%. Obviously, there is one big difference between then and now with many construction companies going to the wall over the last five years or curbing their capacity to cope with the downturn in demand and stay in business. It’s estimated that the sector shrunk by more than a quarter during the recession.

One spin off of that downsizing is that sub-contractors are now increasingly being called upon to fill in the gaps where firms no longer have the manpower or competencies.