Polish road-building investment declines

21 February 2013

After shrinking 19% last year, output in Poland’s road construction market is expected to decrease to PLN20 billion (€4.8 billion) in 2013 as contractual disputes drag down growth in the sector, according to research company PMR.

The contribution of road construction to total construction output in Poland has consistently grown since the country joined the EU, peaking at 28% in 2011. But growth decelerated in 2012 when the sector’s share fell to 22%, and PMR said the coming two years are likely to be challenging for the sector.

The slowdown in Poland’s road building sector has been accompanied by a significant
deterioration in contractors’ finances due to a smaller number of tenders for new projects.

PMR said disputes between contractual parties frequently led to the termination of contracts and delayed numerous projects. Furthermore, when tenders are re-invited, additional costs and delays are incurred. A wave of bankruptcies have also affected the construction sector, with around 300 companies going bust in 2012.

“Some of the key reasons for the rise in insolvencies included low price bids proposed by construction companies and the fact that prices could not be adjusted in subsequent stages,” PMR said, adding that new regulations were currently in the process of being introduced to try to remedy this.

EU funding

A key issue, which forms a basis for future developments within the sector, is to secure funds for planned projects. PMR estimates that projects worth around PLN85 billion (€20 billion) are currently in various stages of preparation. Certainly, not all of them will be executed, and the final shape of the investment programme planned by the Poland’s national roads authority GDDKiA will depend on what European-level grants and loans can be secured.

However, in February, European Commission (EC) funding worth €950 million for Polish road building projects was interrupted while investigations are carried out into an alleged price fixing cartel.

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