Czech construction sector still seeking sure signs of growth after five year slump

The Czech construction sector has suffered like no other over the past five years with a continuous slide in turnover. While there are signs that some sectors might return to growth this year, a wider recovery is not expected until 2015 at the earliest.

Photo: Barbora Kmentová

If any sector epitomises the Czech recession over the last four or five years it is construction. From its peak in 2008, the sector has shrunk by 25.1 percent.

According to the latest survey, unveiled by the company CEEC Research and consultancy KPMG on Thursday, the construction sector is likely to shrink slightly again in 2014 by 0.6 percent. That comes on top of an even worse than expected 8.3 percent decline in 2013. Building sector bosses had expected the shrinkage last year to be around 7.4 percent.

The value of overall new construction orders in 2013 for firms employing 50 or more people was down 2.6 percent at just over 145 billion crowns. The percentage of transport sector orders was down 18.1 percent down but engineering construction witnessed 14.3 percent growth. Across the board growth in the building industry of 1.8 percent is only expected to kick in in 2015.

Václav Matyáš, photo: Association of Building Entrepreneurs of the Czech Republic

Even those survey results might be regarded as optimistic. The head of the Association of Building Entrepreneurs of the Czech Republic, Václav Matyáš, sees a further slump of 3.5% this year follow by zero growth in 2015.

Of course, there are some sectors which appear to be already emerging from the recession. Construction of flats in Prague and other main cities, particularly low cost flats, is one case in point with business expected to grow in the Czech capital by 7.4 percent this year and 5.5 percent in 2015.

But other pointers are not so bright. Outstanding orders at the end of last year stood at 9,400, numerically up by 1.4 percent on the state of affairs at the close of 2012 but the value of the work was down by almost 6 percent down.

It’s in this context that the Czech government is promising to help kick-start the construction sector by resuming investments in infrastructure projects, particularly motorways and roads. That sort of spending has been one of the biggest victims of state spending cuts over recent years.

Bohuslav Sobotka, photo: CTK

Prime Minister Bohuslav Sobotka met with union leaders from the building sector on Thursday and admitted that Czech construction is currently on its knees after five years of uninterrupted contraction and tens of thousands of lost jobs.

Sobotka said that one of the main problems is the poor preparation of transport projects rather than their financing. With that in mind he has promised to bring in new legislation that would simplify construction of projects in the wider public interest. The prime minister also called for realistic plans to be drawn up of what road and rail projects can be completed over the coming years and he suggested the state fund for housing development could also improve its act.

Photo: State Roads and Motorways Directorate

Particular scrutiny though is likely to be focused on the State Roads and Motorways Directorate, which has been the subject of a major personnel shake-up in recent weeks amid criticism of its ability to plan and supervise construction projects, with plans that its status be transformed from a semi-budgetary entity under the Ministry of Transport into a state company.

Unions have pointed out that coordination is also missing in current government plans with five ministries involved in the construction sector in one way or another but little overall oversight of what they are doing.