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Building momentum – an overview of Ireland’s construction sector

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Building momentum – an overview of Ireland’s construction sector

Building momentum – an overview of Ireland’s construction sector
March 30
15:54 2015

To describe the effect of the recession on Ireland’s construction industry as devastating is an understatement. Now less than a quarter of the size it was at its peak in 2006, it represents about 7pc of the country’s GNP, down from 21pc, and 170,000 jobs have been lost in the sector since the property bubble burst.

Construction Industry Federation (CIF) director general Tom Parlon illustrates the damage further: “In 2008, there were 40,000 mortgages taken out. This dropped to 2,500 in 2012. Around 93,000 houses were built in 2006/2007. Last year, there were 8,700.

“Six of the top 10 construction firms by turnover [in 2006] have disappeared, with the likes of Pierse, McNamara Construction and Bowen going into liquidation. The CIF has lost half of its members. The companies that have survived have become very lean, efficient and determined.”

However, industry observers are starting to be tentatively optimistic as signs emerge that the construction industry’s fortunes could be changing.

Following a slight rise in turnover to reach €9.9bn in 2013, the CIF has estimated that the industry will record turnover of €11bn in 2014. There are currently 106,000 people employed in the sector.

A special report released by Construction Information Services (CIS) last year detailing the largest, active and ready-to-go projects for 2015 shows there are 518 key projects with a total value €11bn throughout Ireland already in the pipeline.

This includes €1.4bn in industrial projects, €3.7bn in commercial, retail and hospitality and €1.4bn in residential.

“We didn’t publish this annual report for four years because of the recession. In 2014, we saw that things are picking up in terms of the number of planning applications and projects that had been put on hold as a result of Nama and lack of finance now coming back into production,” says Tom Moloney, CIS managing director.

“We are confident that we can see a sustained recovery of the sector because of the housing deficit and demand in the medical, commercial, and schools areas which is ongoing. There will be a need for more nursing homes and private care facilities because of our aging population.

“The overall requirement for housing is 20,000 a year, but it is not physically possible for the industry to build that much every year. In the Dublin area alone, there is an immediate need for 6,000 houses. Realistically, the industry will probably manage to build a total of 9,000 houses a year up to 2018, as estimated by the CIF,” says Moloney.

According to Parlon, there is a need to encourage house building as clearly a housing crisis is building up with over 90,000 on the social housing list. However, he says, the industry doesn’t have the wherewithal to finance this so it depends on the State and State subsidies.

Government investment

The Government announced in Budget 2015 a €2.2bn investment over the next three years to provide 10,000 social housing units.

“This is a fabulous figure but we are still waiting to see the detail of what it means – meat needs to be put on the bones, but everyone’s mouth is watering about it,” says Parlon.

“Our capital expenditure programme of investing in schools and roads was cut very badly – austerity meant a 70pc reduction in public sector work. If the Government could get over the trauma with Irish Water, it should start investing more in capital programmes.

“A bit more is happening this year in terms of capital expenditure. Work is starting on the Gort-Tuam motorway and the National Children’s Hospital – a project expected to cost more than €300m – will enter the planning stage. The Central Bank is taking over the carcass of the former Anglo Irish Bank building on Dublin’s North Wall Quay and its re-fit is out for tender, which should be a contract worth around €100m, and there also is a new maternity hospital in planning.”

There have been a number of big projects in the private sector thanks to foreign direct investment (FDI) and lately significant investments by indigenous companies have also been coming on stream.

Parlon cites Intel’s €3.64bn investment in upgrading its fabrication centres in Leixlip over the past three years, Shell E&P Ireland’s €4bn investment in the Corrib gas project in Co Mayo and Diageo’s recently opened €300m brewhouse in Dublin.

As for indigenous companies, Parlon notes that Glanbia Ingredients Ireland Ltd has opened a new dairy facility in Belview on the Kilkenny/Waterford border that created 76 direct and 1,600 indirect jobs, while Kerry Group is investing €100m in the establishment of a major innovation centre in Naas, Co Kildare.

“When the Irish economy was at its peak during the Celtic tiger years, the construction industry played a bit part in driving it. Now we believe we can play that role again with massive potential to create jobs,” says Parlon.

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