While the level of optimism in the construction industry has clearly fallen in 2016, it still remains reasonable, mostly on the back of high expectations of 2017. Construction companies are aware that the current slowdown is a transient technical correction, which, sooner or later, will evolve into a spree of intensive spending of EU money.
Slower-than-expected economic growth, lower numbers of calls for tenders announced and contracts awarded in the public procurement sector, thinner order books of construction companies and reduced profitability of the construction sector – all these developments are reflected in the results of a survey of high-level professionals from the management and operating divisions of the largest 200 Polish construction companies which PMR conducted for the report “Construction sector in Poland H2 2016 – Development forecasts for 2016-2021”.
After three years of robust improvement, the latest edition of the survey reveals less buoyant sentiment in the Polish construction industry, though optimism remains well above the levels seen in 2012 and 2013, i.e. the years of correction following Euro 2012. In September 2016, the PMR Construction Confidence Index for the Polish construction industry stood at 7.7 pts, close to the value reported in 2010.
The index declined in the three segments of the construction market, with the most severe falls reported in non-residential construction. For the first time on record, the highest level of optimism was recorded among companies specialised in residential construction. It was driven by a growing number of flats sold by the leading developers and, consequently, a substantial number of contracts for construction of multi-dwelling buildings.
The index was the lowest for civil engineering companies, which reported a significant decrease in projects by local authorities, the PKP group and GDDKIA in the latest survey. At the same time, civil engineering companies’ expectations regarding 2017 are relatively positive – a vast majority of the companies forecast a higher number of contracts from public institutions next year.
In the wake of a slowdown in civil engineering construction, a mere 64 percent of the largest construction companies indicated they took part in EU co-funded projects, a fall of 8 percentage points from last year’s wave of the survey and the lowest proportion recorded since 2008. Companies specialised in civil engineering construction and large construction companies with annual revenue exceeding PLN 100 million (€24 million) were found to take part in EU co-financed projects more often (74 percent of responses).
As shown by the survey results, contractors intend to take advantage of the slowdown to get prepared for the forthcoming market upturn. Therefore, the contractors take various measures they believe will let them achieve a competitive edge. As in the previous edition of the survey, taking active action to obtain new orders from the domestic market, submitting bids in a larger number of tenders and expansion into new market segments were the most popular measures taken by the surveyed companies to gain a competitive edge. Compared to last year’s wave of the survey, investment in company management and investment in human resources also enjoyed greater popularity. One out of every ten companies went for acquisitions to retain advantage over competitors.