Construction Sector Collapsing After Crisis

02. 11. 2011

Construction Sector Collapsing After Crisis

Slovenia's construction sector has all but collapsed since the crisis hit the country in late 2008 and some 20,000 people have lost their jobs in the industry past three years. Two business groups have prepared a set of measures that they deem necessary for the sector's survival.



After 2008, when the construction sector accounted for 7.3% of GDP, everything went downhill, as its share of the economy decreased to 7% of GDP in 2009, to 6% in 2010, and to only 4.3% in the first half of 2011, according to the Chamber of Commerce and Industry (GZS). The GZS data moreover shows that Slovenia ranks at the tail of European countries in the growth of construction, ahead only of Spain and Greece.


Ever since the crisis hit the country, a majority of Slovenia's construction giants has been struggling to survive. Two of the biggest players, SCT and Vegrad, went into receivership in June 2011 and November 2010, respectively. The giants' troubles have caused a number of small contractors and entrepreneurs to face problems and even ruin, the Slovenian Chamber of Trade Crafts and Small Business (OZS) has warned.


The job market has also been affected by contraction in the sector, as the number of workers in construction shrank from 87,947 in 2008 (10.1% of Slovenia's active population) to 69.339 (8.4% of active population) in July 2011. The GZS and OZS said that Slovenia has done nothing to prevent the collapse of construction, pointing to other European countries which earmarked considerable funds to aid the sector. The Finance Ministry on the other hand maintains that a number of measures had been taken, including the adoption of legislation that aimed at securing transparent use of public funds and preventing frauds in public tenders.


Moreover, the ministry said that the state had passed legislation to allow it to provide guarantees for EUR 63.3m of the EUR 170.3m construction companies had taken out in loans as well as changes to the tax legislation which was aimed at boosting payment discipline. The two chambers were however not convinced by the state's efforts and prepared their own set of measures which they think may help turn the sector around.


The GZS proposed that the state protect Slovenian construction companies from the negative effects of globalisation, implement measures for jump-starting investments, draft tax and financial policies, and prepare programmes for providing social security to the workers left jobless by the crisis in the sector. The OZS meanwhile proposed that a part of the construction sector focuses on foreign markets and that the state implement a programme for supporting investments and bank lending.


Both chambers agreed that the state should provide a more transparent system for public contracting, which should be based on expertise and the equality of "the big and the small". They also called for a unified system for planning real costs of construction, which would create the basis to allow small contractors to form associations for cooperation, and aiding their formation as well as finding EU funds for helping the sector.