Construction sector ‘half the size it should be’ as output to fall to 6%

The construction industry is half the size it should be for an economy the size of Ireland, according to a report by the Society of Chartered Surveyors Ireland.

Output in the construction sector is set to fall to 6% of gross national product (GNP) in the current year and to just 5.6% of GNP next year, according to a report prepared by DKM Economic Consultants on behalf of the society.

Having peaked at close to €39bn, or almost 25% of GNP in 2006, output fell to €8.7bn in 2011, or 7% of GNP, well below what would be considered “normal” levels of construction output.

Chairman of the Quantity Surveying Professional Group of the SCSI,Andrew Nugent, said it was vital for the industry and the country as a whole that the sector is put on a sustainable footing.

“Our report on the construction industry in 2012 does not make for pleasant reading, but we believe that it is in everybody’s interests to understand the full extent of the downturn in the construction sector and its impact on the wider economy.

“We do not wish to get back to the situation in 2007 when construction accounted for 25% of national economic output, but currently the industry is half the size it should be. Ireland can sustain an industry whose output is 12% of the economy, and it is important we put measures in place to put the industry and the economy back on track” he said.

Construction costs are down only marginally, even though tender prices have plummeted, the report found.

This was put down to the high cost of building material wholesale prices canceling out the falls in hourly earnings and the number of hours worked. As part of the adjustment back to a more sustainable level of construction prices being bid for work have fallen back to where they were 13 years ago.

The report highlights some growth opportunities. The energy sector where semi-state companies have significant capital investment plans, the emerging green economy and the retrofitting of homes are seen as the most likely to drive growth for the construction industry.