The Irish construction sector is expected to continue its recovery and grow by 21% in 2016 according to the international construction consultancy firm, Bruce Shaw, which is estimating an output level of just over €15 billion for the year. However, the company warned that the increased cost of construction, as companies attempt to recover from recessionary pricing, and lack of skilled resources are hampering the sector’s potential for sustainable growth. The comments were made as the company launched the 2016 Bruce Shaw Ireland Handbook, the recognised leading industry publication for providing industry knowledge,insight and information.
Despite the continued strong growth, the sector is still only 40% of the 2007 peak output and is still well below the recognised European sustainable level of 10% to 12% of GDP. To achieve this ratio, the output of the Irish construction industry should be between €20 and €24 billion. Bruce Shaw has estimated that the cost of construction will increase by 7% in 2016 (6% in 2015). Commenting on the figures, Derry Scully, Chairman of Bruce Shaw, said: “It is encouraging to see the recovery in the construction sector but a number of challenges and risks remain which are hindering the sustainability of that recovery. Construction inflation levels are running well ahead of general inflation with average construction build costs continuing to increase.” However, the most significant concern raised by Bruce Shaw is the huge lack of available skills resources in the industry. “As has been well documented, the construction sector experienced the highest number of company failures of any industry during the recession and employment levels fell to a quarter of their peak levels,” continued Mr Scully. “This has led to a huge skills shortage, particularly in specialist trades such as glazing, mechanical and electrical services but also in traditional trades such as steel fixing and plastering. We can’t fill the gap fast enough to meet the demand and this is seriously impacting on tender levels. It takes four to five years to train construction professionals and a similar timescale to train skilled craftsmen. The industry needs to look at how we can address this issue.” Driving Growth According to Bruce Shaw, recovery in construction output has been driven by both private and public projects. While 2015 saw a resurgence of private developments particularly of new commercial office space and fit-outs in the greater Dublin area, Bruce Shaw expect that this recovery will expand beyond Dublin in 2016 and that development of retail and hospitality projects will also become viable.
In the residential sector, which has been slow to recover, there is an ever increasing demand in major urban areas across the country. The industry output is currently well below the calculated annual requirement of 25,000 residential units. “There have been some policy developments in recent months that should assist the sector in reaching the required output targets in the residential sector, the relaxation in apartment sizes and the Government proposal to invest €2.2 billion in social housing over the next three years, but it will be some time before these start to make an impact. However, until we are able to reduce the skills shortage and manage construction cost inflation more effectively, we run the risk of not achieving the great potential that lies in the sector”, Scully concluded. The Bruce Shaw Ireland Handbook, an annual Bruce Shaw publication, provides a review of the Irish construction market and an outlook for 2016. It forms the Ireland chapter of Knowledge Centre, the company’s online portal of construction data from 12 international markets around the world. Now in its 14th year Knowledge Centre has become a valuable online resource for busy construction professionals in need of up-to-date, easy to access, relevant industry information.