Three in four construction companies in Daegu are struggling with declining orders and deteriorating profitability, a new survey shows.
Concerns are growing that the regional construction industry's crisis could become prolonged as firms face a simultaneous squeeze from cash shortages and rising construction costs.
According to a survey on business conditions and difficulties in the construction sector conducted by the Daegu Chamber of Commerce and Industry, 71.6 percent of respondent companies said their business conditions had worsened compared with the same period last year.
Some 75 percent of firms said their construction orders this year had declined, and of those, 41.7 percent reported a drop of 20 percent or more.
The most commonly cited difficulty was a decrease in new orders, flagged by 85 percent of respondents, followed by rising construction costs and low contract prices (38.3 percent) and the burden of financing costs due to high interest rates (21.7 percent).
Profitability has also taken a serious hit. Some 75 percent of firms said profitability had worsened over the past year, citing rising raw material and construction material prices (46.7 percent), low contract and construction unit prices (42.2 percent) and rising labor costs (37.8 percent) as the main causes.
Some 65 percent of firms also reported difficulties managing cash flow.
The outlook for the sector was equally bleak. Some 65 percent of respondents expected construction market conditions to worsen further over the next year.
On the question of when conditions might recover, 50 percent said recovery would be difficult for now and 30 percent said it would take more than two years — meaning 80 percent do not expect a near-term rebound.
To address the crisis, local construction firms called for appropriate cost calculations for public works projects that reflect inflation and rising input costs (50 percent), as well as expansion of public construction budgets for infrastructure and earlier project tendering (46.7 percent).
Expanding region-restricted bidding (63.3 percent) and increasing local firms' participation in joint contracts for large public projects (43.3 percent) were also identified as key priorities.
"The regional construction industry is facing a complex crisis involving falling orders, rising construction costs and cash shortages," said Lee Sang-gil, standing vice president of the Daegu Chamber of Commerce and Industry. "Securing project volume through expanded public construction investment and early tendering is the top priority."
kbj7653@heraldcorp.com
