Builders: The sector will decline by a tenth year-on-year this year due to the coronavirus

Prague - Czech construction is expected to decrease by 10.1 percent year-on-year this year due to measures against the spread of coronavirus, and by 3.1 percent next year. This is according to the current survey conducted by CEEC Research among 60 construction companies. Just in mid-February, they were anticipating a growth of 1.6 percent this year and 0.8 percent next year. On Wednesday, it will be a month since the first coronavirus infection was reported in the Czech Republic.

"Construction is a sector that is very demanding in terms of human capital and material inputs, and the current situation has and will have an impact on both of these areas. The development for construction, which inherently cannot respond as flexibly as some other sectors, will therefore be crucial," stated Tomáš Koranda, the director of Hochtief CZ.

Smaller companies with an annual turnover of up to 100 million crowns and those primarily engaged in the construction of transportation infrastructure are somewhat more pessimistic in their estimates. Smaller companies anticipate a decrease of 10.8 percent this year and 4.5 percent next year.

"The shortage of workers from recent years has been further exacerbated by border closures and restrictions in accommodation. Many foreign workers are employed on construction sites, so complications with production capacity can be expected, which was already at its limits in recent years due to a lack of personnel. It is necessary to start looking for ways to bring foreign workers back here while maintaining health and hygiene measures that protect us all," added Jakub Šimáček, managing director of TBG Metrostav.

According to the Czech Statistical Office, construction grew by 2.4 percent year-on-year last year. Ground construction, mainly consisting of the construction of apartments, offices, or industrial halls and warehouses, increased by 2.1 percent. Engineering construction, which mainly involves building transportation infrastructure, rose by 3.5 percent. The year before last, construction overall grew by 9.2 percent, the highest increase since 2003.

At the end of the third quarter of last year, there were 378,464 employees and entrepreneurs working in construction companies in the Czech Republic. Compared to the same period in the pre-crisis year of 2008, this number was nearly one-tenth lower. The largest outflow of workers occurred between 2012 and 2013, when the sector lost about 16,000 people.

According to information from ČTK, large construction companies are not halting their production. The exception is Eurovia CS, which stopped all construction work and office activities the week before last. Other companies allow remote work as much as possible, but this is not feasible on construction sites. Some are operating in emergency mode, implementing alternating shifts, and recommending that employees cancel external meetings.

The crisis in 2008 hit Czech construction much harder than most other sectors. It declined for five consecutive years starting in 2008. During this period, it lost nearly 30 percent of its revenue. According to most analysts and industry insiders, this was due to extensive cuts in large infrastructure projects made by the then-government.

According to the Association of Entrepreneurs in Construction, the government must not repeat these mistakes. "Back then, unnecessary investment restrictions slowed construction much more than most other sectors. The impacts of the current measures against the spread of coronavirus could reach billions of crowns," stated Jiří Nouza, the association's president.

Some analysts suggest that construction could be a driving force in the economic recovery after the measures against the spread of coronavirus end. It is not as dependent on foreign trade. They added that the current crisis's impact on construction cannot yet be quantified. They noted that construction will face a decline in contracts because people will postpone large investments, such as building homes.