>@Dusan Ondrejicka/EIB

Nine out of 10 companies active in the Czech Republic invested in the last financial year, and their investment outlook for this year is positive, according to the country overview of the annual EIB Group Survey on Investment and Investment Finance (EIBIS).

As far as investment activity is concerned, replacement of existing buildings, machinery, equipment and IT dominates, according to the survey, based on interviews with 479 firms conducted in July-October 2016. The survey covered only company investment and did not focus on the public sector.

Capacity expansion and investment in new products are strong in manufacturing. Czech firms invest in innovation, and they are generally active in investing in the adoption of existing technologies. While slightly more than half of investment goes to machinery and equipment some 7% is directed to R&D. Investment activity in this area is broadly in line with the EU, but better governance of R&D spending could help improve the link between research and business. Foreign-owned firms, compared to domestic firms, have a more optimistic investment outlook, are significantly less finance-constrained, have better quality capital and innovate more.

An investment gap does not seem to be a major concern for Czech companies. Less than one in five firms reports that it invested too little over the last three years. Firms that invested too little seem to have an inferior quality of capital, rather than quantity. A lower share of machinery and equipment than in the EU (38% vs. 44%) is described as state-of-the-art. Only 29% (vs. 40% EU-wide) of firms’ building stock meets high efficiency standards. In particular, firms in the construction sector report the largest investment gap and are above full capacity, but they also show relatively larger gaps in terms of the quality of their capital stock.

Similarly, as in other EU Member States, the political and regulatory climate is the main short-term barrier to investment. A lack of skilled staff is a long-term obstacle to investment for nearly nine in ten firms (compared to 70% EU-wide) and for six of them it is a major obstacle, making the education sector an investment priority.

The lack of external financing has not been viewed as a major problem for Czech companies: only 3% of firms consider themselves to be finance-constrained. The proportion of finance-constrained firms is lower than the EU average.

EIB Vice-President Vazil Hudák commented: “The Czech economy, with its strong historical foundation in manufacturing and skilled staff, benefited tremendously from EU integration and placed itself well within European and global supply chains. The newly launched EIB Investment Survey for the Czech Republic confirms that the investment activity of Czech firms remains strong. In order to retain their competitive edge, the survey shows that Czech firms would benefit from further investment in skills and education, improvement of the quality of the capital stock, support for innovative SMEs, as well as the upgrading of healthcare and communications infrastructure. The EIB Group stands ready to support the Czech Republic, and Czech firms, through its lending and guarantee instruments”.

The 2016 EIBIS survey is an EU-wide survey of 12 500 firms that gathers quantitative information on investment activities by both SMEs and larger corporates, their financing requirements and the difficulties they face. The results are weighted by value added, reflecting firms’ contribution to the economy. In the CESEE EU Member States, the survey covered 4 881 firms in 11 countries.