Factory construction costs growing

The cost of setting up a new factory in Poland is growing, due to the rising costs of construction materials and labor. Analysts see this as unlikely to deter foreign investment, however.

According to Central Statistical Office (GUS) data, the overall cost of constructing a production plant grew by 5.8 percent between Q1 2007 and Q1 2008. The cost of building a warehouse grew by 8.8 percent over the same period.

Between Q1 2007 and Q1 2008, the average cost of machine-aided construction work grew by seven percent, whereas construction work involving manual labor grew by 7.1 percent.

Bartłomiej Sosna, a construction market analyst from PMR Publications, said costs would continue to rise despite a slowdown in price growth visible in the last few months. "The growth of construction materials prices, growing salaries in the construction branch and problems finding contractors will lead to higher prices," he told WBJ.

Asked if costs would deter investment, Sosna noted that several Polish companies had changed their investment plans because of price growth. He said he hadn't seen evidence so far of foreign firms changing their plans.

According to Tomasz Brodzicki, an analyst at the Gdańsk Institute for Market Economics, growing costs will not deter foreign investors since the decision to select Poland as an investment destination was dependent on other factors.

"A huge domestic market and the availability of human capital are significant factors for Poland," Brodzicki said. Foreign investment in the service sector was significantly higher than the production sector.