Construction will decline by eight percent, employees are missing

Prague - Czech construction will decrease year-on-year by seven to eight percent this year, and performance will also decrease next year. While the number of contracts is increasing for large companies, they are lacking workers, especially foreign ones. The state should increase its activity in the construction of transport infrastructure. Analysts stated this, whom ČTK contacted today. According to data from the Czech Statistical Office (CZSO), construction decreased by 8.2 percent year-on-year in September and decreased by 6.6 percent for the first three quarters. "The decreased performance does not arise directly from a lack of work for construction companies, at least not for the larger ones. Companies with more than 50 employees showed at the end of September a backlog of work in current prices that was 13 percent higher than last year, and their new contracts in the third quarter also slightly increased year-on-year. However, the segment of small companies, which account for up to half of the sector's performance, seems to be in a much worse situation," said UniCredit Bank analyst Pavel Sobíšek.

According to him, the outlook for the sector is not very optimistic. For this year, he expects a year-on-year decrease in construction of seven to eight percent. "For next year, we are also counting on a decrease, although perhaps milder than this year. While large infrastructure projects will continue at least at this year's level, the volume of contracts from the private sector, as well as from regions or local governments, will be affected by revenue shortfalls and financial uncertainty among investors," Sobíšek added.

Ground construction, primarily the construction of apartments, offices, industrial halls, and warehouses, decreased by 8.9 percent year-on-year in September. Engineering construction, consisting mainly of transport infrastructure construction, decreased by 6.7 percent. "However, construction as such certainly does not suffer from a lack of contracts. The companies themselves indicate in surveys that their main obstacle to growth is the lack of employees. As a sector dependent on foreign labor, it has been affected by the shortfall of foreign workers, which has occurred since the beginning of the pandemic," stated ČSOB analyst Petr Dufek.

According to Komerční banka analyst Jana Steckerová, construction production pleasantly surprised in September. The year-on-year decrease is the lowest since April, and month-on-month, construction increased by 0.6 percent. "The construction sector will also likely continue to suffer from a lack of workers, which will limit the volume of work performed. While before the pandemic, it was due to an overall lack of people in the labor market, now it will also be due to the departure of foreign workers. For this year, we expect a decrease in construction of almost seven percent, and in the following year by another 5.8 percent," said Steckerová.

Trinity Bank analyst Lukáš Kovanda expects a decrease in construction of eight percent this year. Due to relatively high inertia, he believes that the sector will also decline significantly next year. "In engineering construction, investment activity funded by public budgets is being manifested. However, realized public investments in construction are still lagging behind the spring promise of the government that investments will be made to overcome the coronavirus crisis," Kovanda pointed out.

According to Natland analyst Petr Bartoň, construction confirms that it has a relatively delayed but then deeper response to economic developments. "While during the spring lockdown, the work on completing and starting apartments continued due to inertia, the main declines began to occur after it ended," Bartoň added.