More than half of Czech companies expect a decrease in profit or a fall into loss this year

More than half of Czech companies expect a decrease in profit or a fall into loss this year

Over half of Czech companies expect a drop in profit or a fall into loss this year

Vice President of the Union of Industry and Transport Radek Špicar.

Prague – Czech companies expect a challenging year this year. More than half of them expect to lose profit or make a loss. About 14 percent of domestic companies expect an increase in profit. The situation differs in individual industries and companies. The worst-case scenario that threatened last year, but didn't happen. This follows from a survey of the Union of Industry and Transport of the Czech Republic, which its representatives published at today's press conference. According to the companies, the state should create a long-term aid concept.

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“Thanks to the efforts of the companies, the anti-crisis measures adopted and the positive development in the energy markets, we have so far avoided the crisis situation that threatened last year. Without the contribution of this combination of factors, the preliminary economic results for 2022 and the results of our investigation would have been different. Companies are in overall, they are a little more optimistic about their outlook now than they were even in the fall. But they are still worried about further economic development. The economy is slowing down, and the profitability of many companies is falling. Companies understandably see hope for growth, but they are still hampered by a number of uncertainties and question marks,” he said today the vice president of the union Radek Špicar.

The survey of the union, which took place this year from January 12 to 25 among 136 industrial firms, showed that about 39 percent of enterprises expect a decrease in profits. another six percent of companies expect the loss to continue, and seven percent estimate that they will fall into a loss this year. On the contrary, about a third of domestic companies expect to maintain their positions and profit, and 14 percent also expect an increase in profit. However, the situation often differs, both between companies and sectors.

According to the union, the most significant factors affecting the functioning of companies are energy prices, rising prices of raw materials and materials, high inflation and associated pressures on wage growth, and a lack of employees or a reduction in domestic and foreign demand. According to the association, this also limits the possibility for companies to reflect increased costs in their prices.

According to the survey, companies most often plan to respond to the current situation on the market by reducing operating costs or increasing the price of production. A third of businesses are also looking for alternative technical solutions. Businesses are also more cautious in their investments, with 35 percent reducing investment in their development, according to the survey. 59 percent of companies plan to invest in energy savings this year, and 39 percent of companies want to invest in their own renewable energy sources.

According to the companies, the current crisis is a consequence of the Russian invasion of Ukraine, the direct and indirect negative effects of the war in the form of, for example, a sharp increase in the prices of materials and energy have so far negatively affected the business of two thirds of the companies. “After the coronavirus crisis, companies slowly started to catch their breath, but with the advent of the war, everything got stuck. Logistics and the availability of some raw materials became more difficult, and energy became more expensive. In short, the war generally slowed down economic growth and accumulated other barriers that companies have had to fight with ever since . In addition, the demand of companies has started to decrease, and a certain cooling can also be seen in the expectations for the coming months,” pointed out Špicar.

According to him, companies would especially appreciate the long-term concept of the state. “Whether it is export support for new markets, support for applied research, including the favorable attitude of the financial administration towards tax deductions, the launch of investment support programs or generally an overall improvement of the state's approach to entrepreneurs,” Špicar added.

Companies are also against any possible increase in the tax burden. Under certain conditions, only a third of businesses would agree to it. At the same time, according to the companies, it depends on what specific taxes the government would decide to increase and by how much.