(Bloomberg) -- The shutting of European borders in a bid to contain the coronavirus pandemic is about to derail a 200 billion-zloty ($47 billion) industry.
The Polish construction sector, which employs 400,000 people and accounts for 8% of gross domestic product, faces unprecedented trouble amid concerns over the Ukrainian workforce it depends on. The builders are gradually heading back to their homeland while would-be reinforcements can’t cross back into Poland.
As Poland puts the final touches on its stimulus package to avoid recession and protect jobs, a lobby group for builders warned about the imminent risks and called for bolder steps. The wish list of the industry -- one of the hardest hit by the closing of borders -- includes prolonging deadlines to avoid penalties and the suspension of some taxes and fees.
“We need to completely re-evaluate our forecasts for construction and real-estate markets in Poland ,” Dariusz Blocher, Chief Executive Officer at Budimex SA, Poland’s largest builder, wrote in a letter to shareholders on Thursday. “The virus will have significant impact on earnings of companies, including Budimex.”
Demand Side
Besides the job-market squeeze, the construction industry may soon also see a decline in demand as investors put projects on ice amid increasing restrictions due to the outbreak as well as uncertainty over the state of the post-virus economy.
Poland’s economy may shrink 1% this year if curbs on movement and consumption remain in place until June, the Finance Minister said in an interview last week.
The country has effectively shut its borders for foreigners and the few that it allows back in face a mandatory quarantine. To at least partly mitigate the impact, the government has extended work visas for foreigners still in the country.
“The serious absence of workers will lead to a significant decrease in the industry’s capacity,” the Polish Association of Construction Employers said in an open letter to the government.
One in Five
The lobby said about 20% of the construction industry’s Ukrainian workers already went home and won’t come back until borders are reopened -- which could take months. By some estimates, 2 million Ukrainians work in Poland -- traditionally one of the continent’s biggest exporters of labor to western Europe.
Furthermore, an increasing number of construction workers are on sick leave while the risk of shutting down building sites is growing as more and more people test positive for the virus, triggering 14-day quarantines for their colleagues.
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Poland has seen a rapid growth in the construction of roads, railways and all types of buildings since it joined the European Union in 2004. Until recently, it was in the middle of yet another EU-funded investment spree.
The state road agency is spending 143 billion zloty through 2025, with 12.2 billion zloty of contracts to be awarded this year alone. The main railway investor planned to spend a further 15 billion zloty this year. Now, projects are at risk.
The virus outbreak in Poland is still at an early stage and if it follows the example of some western European countries, the pain felt by businesses will escalate. In Austria, where number of confirmed cases is six times higher than in Poland, Strabag SE, the country’s biggest builder, shut down all of its 1,000 construction sites last week. It hasn’t yet decided on its international operations, including Poland, where it’s also one of the top construction companies.
“The situation for Polish construction sites is getting more and more dangerous every day,” the builders’ lobby group said.
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