Over the 2010-2020 period, the Czech Republic’s GDP increased by 16.9%, totalling CZK 4,971.5 billion (EUR 194.3 billion) in 2020. This represents a decline of 5.6% as compared to the 2019 levels.
In 2020, the decline was mainly influenced by household consumption, investment expenditure, and by a slump in external demand due to COVID-19 pandemic.
In line with the overall economy, the number of enterprises in the broad construction sector increased by 14.4% over the 2010-2020 period, totalling 325,319 in 2020. With regards to sub‑sectors, the largest increment was reported by the real estate activities (+17.6%) sub-sector, followed by the narrow construction (+16.8%) and the architectural and engineering activities (+11.9%) sub-sectors, respectively, over the same reference period.
In parallel, the volume index of production in the broad construction sector increased by 2.5% over the 2015-2020 period, mainly driven by a 7.0% increase in the production of construction of buildings partially offsetting a 7.0% decline in the production of construction of civil engineering between 2015 and 2019.
Total turnover in the broad construction sector increased to EUR 59.9 billion in 2020, representing an increment of 15.9% since 2010. This overall increase was primarily driven by growth in three sub‑sectors – the real estate activities (+32.7%), the manufacturing (+23.4%) and the narrow construction (+15.1%) sub-sectors over the 2010‑2020 period.
Similarly, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 12.8% in 2011 to 16.3% in 2018, marginally lower than the EU-27 average of 16.7%. The real estate activities sub-sector remained the most profitable (40.6%), followed by the manufacturing (14.1%), the architectural and engineering activities (13.5%) and the narrow construction (11.3%) sub-sectors in 2018.
With regards to employment, there were 645,938 persons employed in the broad construction sector in 2020, representing a slight increase of 1.8% since 2010. This was primarily driven by the increase in employment in the real estate activities (+8.2%), the architectural and engineering activities (+4.1%), as well as the narrow construction (+2.5%) sub-sectors, offsetting the drop observed in the manufacturing sub‑sector (‑6.4%) during the same reference period.
Several initiatives have been launched by the Czech government to promote the housing market. In 2020, the government repealed the real estate acquisition tax with retroactive effect from 31st March 2020. It also announced that, effective from 1 January 2021, landlords will not be required to deduct VAT on purchased services and goods directly related to rental income from residential properties. The Social Housing Concept of the Czech Republic 2015–2025 is also being updated by the Ministry of Labour and Social Affairs (MLSA) under the changed title of the Affordable Housing Concept of the Czech Republic 2020–2025.
As part of the Recovery and Resilience Plan (RRP), Czech Republic would be supported by EUR 7.0 billion in grants from the European Commission. The country would allocate around 20.0% (EUR 1.4 billion) of the total towards energy efficiency measures .
The plan would include financing the large-scale renovation programmes to increase the energy efficiency of residential and public buildings, including childcare and long-term care facilities. The country would also provide supports for the green transition through investments of EUR 1.1 billion in sustainable mobility. The plan also includes supporting digital transition through digital skills with investment of EUR 585.0 million in digital equipment for schools, training for teachers, new university programmes in fast-growing digital fields and upskilling and reskilling courses for citizens.
In the context of civil engineering market, the CZK 19.5 billion (EUR 762.2 million) rail line connecting Václav Havel Airport to Prague is currently under progress. Additionally, in November 2020, the Czech government approved the reconstruction of the Ostrava railway junction, amounting to CZK 25.0 billion (EUR 977.2 million). The government also approved the expansion of the Prague Václav Havel airport in January 2020. In 2019, the Czech government has already approved a National Investment Plan for 2020-2050, with an allocation of CZK 8.0 trillion (EUR 312.7 billion) and including 22,000 projects. Almost 77.0% of this allocation is earmarked for transport sector projects.
With regards to road infrastructure, Czech Republic is in the pre‑investment phase of constructing various high-speed lines. The construction work is expected to begin by 2025 with the first sections expected to be ready by 2028. It is expected that about CZK 15.0 billion (EUR 586.3 million) will be spent each year on construction or planning throughout the project life cycle.
While these policy initiatives will support the development of the construction sector, the latter faces two major issues. Firstly, the construction sector suffers from late payments, which worsened due to the outbreak of COVID-19.
As per the 2020 Atradius Payment Practice Barometer, the total value of overdue B2B invoices by businesses increased from 24.0% in 2019 to 39.0% in 2020, representing an increment of 62.5% in late payments.
Secondly, the continuing shortage of skilled workforce continues to be a major concern for the sector. Although the COVID 19 pandemic has resulted in lower demand for labour, structural issues related to labour, and skills shortages still persist.
Overall, the Czech construction sector has a positive outlook in the medium and long term. More specifically, the housing market is expected to be one of the primary growth drivers. Correspondingly, public sector infrastructure, digitalisation and the upgrade of the transport system, supported by EU funding, are expected to dominate the broad sector growth.