Czech construction sector sees solid growth in 2015

The Czech construction sector, one of the biggest victims of the economic downturn, is now showing solid prospects of growth for this year with the across the board revival expected to continue into 2016. Growth will, however, bring some of its own problems.

Photo: Barbora Kmentová

The Czech construction sector can perhaps start popping the champagne bottles again after several years in the doldrums.

Growth across the sector this year is expected to reach 4.0% after a cautious 2.3% upturn in 2014. Expectations are that the upward trend will continue into 2016, albeit at a slightly slower pace of 3.6, according to the latest quarterly evaluation released this week by the CEEC consultancy.

Around a fifth of companies are expecting even stronger growth for this year of between 5% and 10%, the survey adds.

Those figures represent a sharp contrast to the deep recession suffered for five successive years from 2009. The market contracted by 7.4% alone in 2009 and by 6.7% as recently as 2013.

Photo: cuteimage, FreeDigitalPhotos.net

A sharp rise in public tenders and the revival of private projects are fuelling the construction recovery. Public contracts rose 6.7% in 2014 in terms of the overall value of contracts compared with the previous year. Private contracts rose by 18.7% to total 116.9 billion crowns.

Bosses in the building sector say that many office projects that were mothballed during the long recession are now being dusted down and revived, projects for flat construction in cities and towns have already perked up in the last couple of years, and industrial projects are going forward, they add.

Recruitment is now expected to pick up with four out of 10 companies surveyed saying they will take on more workers this year. The construction sector is reckoned to have shed around 50,000 jobs during the five year long downturn.

Photo: Sanja Gjenero, Free Images

Costs though are also seen rising. Four out of 10 companies across the board expect their costs to climb this year, partly as a result of higher demands from sub-contractors, but also because they are seeking to transform their recent hand-to-mouth existence and benefit from higher profit margins themselves. The proportion expecting to increase charges rises to two-thirds among the biggest construction companies.

Photo: Filip Jandourek, Czech Radio

Many companies also expect the revival of demand will spark an influx of foreign construction companies into the country. That is seen as a realistic prospect by around a third of local companies with three out five firms believing their prospects will be damaged as a result.

Problems are also seen continuing with the way in which public tenders are staged. Smaller contracts do not have to be put out to public tender with the result that they can often proceed quicker but with the disadvantage, for some companies, that they are not even aware that they are taking place and do not take part. Conditions attached to competitive public tenders are unrealistic meaning that no one wants to take part and they have to be repeated, slowing down the whole process, other companies complain.