Construction sector gloom looms large in Bavaria
The construction sector in Bavaria is bracing itself for tough times ahead. A staggering 62% of construction companies expect their business to worsen further in the coming months, as revealed by Wolfgang Schubert-Raab, President of the Bavarian Construction Guilds Association (LBB). The downturn in residential construction is not expected to abate anytime soon, the LBB warned on Monday in Munich.
The LBB anticipates a drop of between 7-11% in the construction sector's turnover next year. In its autumn economic survey, the industry body asserted that nearly all construction sectors are bracing for a decline in sales, save for the finishing sector. This comprises tradespeople such as heating installers, window fitters, painters, and others who transform newly constructed buildings into habitable homes.
"The predicament facing the Bavarian construction sector is grim," Schubert-Raab noted, also representing the industry's interests at a national level as President of the Central Association of the German Construction Industry.
The sector's concerns are further fueled by debates about the federal budget. Following the Federal Constitutional Court's recent ruling on the 2021 supplementary budget, the construction industry fears potential budget cuts as the public sector plays a crucial role in its clientele.
Schubert-Raab urged the state government to avoid slashing its construction budget. "A functioning infrastructure is crucial for addressing the major challenges of housing construction, industrial policy, climate change, and the energy transition," he emphasized.
The LBB survey revealed that 38% of construction companies anticipate needing to implement short-time work due to a lack of orders. However, 56% of firms still intend to train apprentices to the same extent as before, and even 25% aim to increase their training output.
The construction industry's economic outlook is dismal, with 62% of companies predicting further deterioration of business. This pessimism is partially attributed to concerns about potential decreases in public sector orders stemming from budget discussions and the Federal Constitutional Court's recent ruling on the 2021 supplementary budget.
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Enrichment Insights:
The Federal Constitutional Court's ruling on the 2021 supplementary budget has significant implications for public sector orders and the construction industry in Bavaria. The court's strict interpretation of the debt brake and emergency credit authorizations affects the ability of the government to raise funds for general policy measures, impacting public sector projects and construction initiatives that rely on such funding.
Supplementary budgets cannot be passed retroactively, leading to delays if funds are not allocated in a timely manner. The loss of €60 billion credit authorization due to the nullity of the Second Supplementary Budget Act 2021 could directly impact public sector projects, potentially affecting ongoing and future projects in the construction sector.
Contractors and project managers might need to adjust their plans and timelines to accommodate the new financial constraints. In the long term, the ruling could encourage more transparent and timely allocation of funds, benefiting the construction industry through better financial planning and predictability.
