Construction output is at its highest level since 2001, but skills shortages are hampering the ability to meet demand and uncertainty around Brexit is causing concern
With output at its highest rate since 2001 and 50% more professionals employed in the sector compared to 2013, there is increased confidence in the construction industry across all regions.
However, the majority of activity is in the commercial sector, with the cost of construction a major barrier to more activity in the residential sector.
While the economy is set to expand, the requirement for adequate housing and infrastructure is a challenge, particularly at a time when the sector is struggling to recruit skilled craft people and professionals.
As Article 50 has been triggered, the impact of Brexit is looming and causing concern and uncertainty.
Those polled in the survey expect there to be a much-needed increase in the level of residential construction in the next 12 months. Housing is still considerably behind what is required for a growing economy and population in Ireland, but the cost of construction remains a considerable challenge particularly when combined with a static productive infrastructure sector.
In the non-residential sector, almost two thirds reported an increase in output in 2016, with further increases expected.
The increase in construction costs in the sector was reflected in the survey with three quarters of respondents reporting higher costs in 2016. Much of this increase in costs is primarily due to increased demand for construction services rather than increases in materials. With inflation at over 6% per annum, there is the possibility pricing levels may return to 2006/2007 levels in the coming years.
A skills gap continues to be an acute issue in the construction industry. The survey highlights difficulties hiring skilled craft workers, quantity surveyors and engineers.
To cater for increased activity, a number of short term solutions have been devised, including sourcing labour from abroad. However, the high costs of accommodation, particularly in Dublin, is now making Ireland an expensive place to work.
“There are opportunities for the construction industry to drive a reduction of costs through processes like Build Information Modelling and prefabricated technologies”
Like most sectors, the construction industry is struggling to understand what Brexit will mean for its members. Very few believe it will have a positive impact on their business. There is concern among those surveyed about what impact there may be on investment decisions and their revenues from projects in the UK.
Conversely, others said that they believe Brexit could lead to increased demands for office space and more foreign direct investment in Ireland overall.
The survey shows that the requirement for non-bank finance is reducing. The most common sources of non-bank finance continue to be private equity, joint ventures and mezzanine finance.
For the first year, crowdfunding featured as a first choice for 10% of respondents. This source of finance would not typically be associated with the industry.
Director, PwC Ireland (Republic of)
Tel: +353 1 792 5478
Manager, PwC Ireland (Republic of)
Tel: +353 1 792 5517