In 2017 and 2018, Slovenian construction once again experienced growth in all areas, but turnover has not yet returned to what it was in pre-crisis times. At the same time, some indicators show that the trend of growth will be reversed downwards in the near future.
Construction is one of activities that was hit the most by the economic crisis ten years ago. While most areas of the economy (industry, trade, services) have already exceeded pre-crisis turnover, construction is an activity that is still far behind in growth compared to other activities. After a significant decline in both turnover, the number of persons employed and the number of enterprises after 2008, we again detected growth of all three indicators partly after 2013, and especially in 2017 and 2018, when we can again talk about so-called conjuncture. If the number of enterprises registered in construction has already equalled that in pre-crisis times (in 2018 there were 19,220 enterprises registered in the construction sector), however we are still far behind (when comparing 2018 with 2008) in turnover (by almost a third) and in the number of persons employed (by almost a quarter). At the expense of the small number of workers, labour productivity increased and amounted to EUR 24,925 in 2018, exceeding the values before the economic crisis. A slightly different picture is presented by the data on issued building permits and the confidence indicator in construction, which can be used as a kind of predictor of the future situation – in these two cases, the growth trend has already turned downwards.
The value added lower than before the crisis
In Slovenia construction in 2018 contributed almost 7% of the generated value added (amounting to almost EUR 1.7 billion), this share has been constantly slowly increasing since 2015. For comparison, in the period before the economic crisis, that is in 2008, construction accounted for almost 11% of the total value added. More than half of the value added in 2018 was created by enterprises engaged in specialized construction activity (more than 59%; specialized construction activity includes demolition and site preparation, electrical, plumbing and other construction installation activities, and building completion and finishing), followed by enterprises that are involved in construction of buildings (23%) and enterprises that are involved in civil engineering (almost 18%).
Construction enterprises generated turnover of almost EUR 6 billionConstruction enterprises in Slovenia generated turnover of almost EUR 6 billion in 2018, which is still almost 30% less than in 2008, but also by more than 34 % more than in 2013. The largest share of turnover (over 49%) was made in 2018 in specialized construction activity, followed by construction of buildings with almost 30% and in the last place by civil engineering with almost 21%.
In 2018, there were 19,220 enterprises in Slovenia registered in construction activity, and their number almost achieved the number of enterprises in 2008. Most of the enterprises in 2018 were registered in specialized construction activity (more than 81%).
67,582 persons employed in construction in 2018After a great fall (in 2013 there were 32 % fewer persons working in construction compared to 2008), the number of persons employed grew slowly. In 2018 (with 67,582 persons employed) there were still 25 % fewer persons employed in construction in Slovenia compared to 2008 (89,766 persons employed).
Small enterprises prevailSince 2008 the number of births of enterprises in construction has been declining steadily; the growth occurred only in 2017 (in 2008 the number of births was 3,065 and in 2017 half less, respectively 1,535), whereas in the same period (2008–2017) the number of deaths of enterprises in construction has also been declining (in 2018 there were 1,562 deaths of enterprises and in 2017 only 950). Micro and small enterprises still prevailed among construction enterprises, 94% of enterprises registered in construction had fewer than 10 employees in 2017. Compared to 2008, there were more than half of the medium and large enterprises less in 2017, but in the same period the number of groups of enterprises doubled, which means that they are predominantly small but interconnected.
The less educated workforce prevails
In 2018 almost 70 % of employees in construction were residents of the Republic of Slovenia, while 30% were foreigners. Most of the foreigners were citizens of Bosnia and Herzegovina, followed by citizens of Kosovo, Northern Macedonia and Croatia. The majority of employees in 2018 were men (more than 90%). More than 39% of employees in the construction sector had completed a vocational upper secondary school, almost 33% had completed a technical or general secondary school, followed by employees with basic education (almost 13%), only 11% of the employees had tertiary education.
Although the proportion of persons employed is still considerably lower than in the pre-crisis period, the labour productivity in construction is growing and has already exceeded the pre-crisis period. The labour productivity (value added per person employed) was in 2018 compared to 2008 more than 5% higher, while compared to 2013 it was almost 32% higher and amounted to EUR 24,952.
Labour productivity is rising
The average gross earnings in construction lower than the Slovenian averageIn spite of the economic crisis, gross earnings in construction, unlike other indicators, grew by 2011, then slightly fell (by almost 4% between 2011 and 2015) and began to rise again after 2015. Average monthly gross earnings in construction amounted to EUR 1,290 in 2018 and were more than 12% higher than in 2008. The highest average gross earnings in construction in 2018 were received by employees in the Pomurska statistical region (1,429 EUR), while the lowest gross earnings were recorded in the Podravska statistical region (1,219 EUR). The average gross earnings in construction in 2018 were 23% lower from the Slovenian average.
Construction activity the highest in October and NovemberMonthly indices of the value of construction put in place show a gradual increase in the value of construction put in place. In 2018, the value of construction put in place in comparison with 2017 increased by 20%, while the year before (compared to the previous year) it was 17% higher. Construction activity is often dependent on weather conditions, but in the past few years in most cases, the highest growth has been observed in October and November, while the lowest was in January and February.
Despite the somewhat more encouraging picture shown by data on Slovenian construction, especially for 2017 and 2018, data on building permits indicate that the trend of growth could be reversed in the near future, as the number of issued building permits has fallen in the last three years (in 2018 the number of issued building permits fell by 4% compared to 2016). The trend continues in 2019 - 10% less building permits were issued in the first half of 2019 than in the same period in 2018. Only the number of building permits issued for residential buildings increased slightly, while the number of building permits issued for non-residential buildings decreased. In the observed period (2016-2018), the surface of buildings for which building permits were issued increased (by 8%), as did the number of dwellings in these buildings (by more than 19%).
The confidence indicator in construction (comprised of the overall order books and employment expectations) already indicates a further decline in this activity, as in the first six months of 2019 the indicator was constantly lower than the average of the previous year. Also the data on enterprise expectations (order books expectations, employment expectations, price expectations) indicate that companies reached a peak sometime in early 2018, after that expectations began to fall. An exception was the indicator assured work in hand which was in the first six months of 2019 constantly higher compared to the average of the previous year. Construction companies indicated as a limiting factor for doing business, in particular, the shortage of skilled labour, the factor of competition in their own sector and high labour costs.
The confidence indicator in construction is falling