Large building projects may need to find alternative funding

Alternative funding mechanisms — such as equity finance and institutional investor pre-funding — could be needed to boost large-scale building projects in the short-to-medium term, the Construction Industry Federation has said.

Addressing delegates at the CIF’s s annual conference in Dublin yesterday, president Philip Crampton said that while the construction sector is “on the cusp” of growth again, a claim backed by recent positive activity and employment data, the banks aren’t providing development finance.

“It is quite telling that the only serious player providing development finance for large- and medium-scale building projects, at the moment, is Nama. This shows the banking system is still far from fixed.

“In the short-to-medium term we should probably be looking at alternative ways to fund these projects,” he said.

Although it admits that Government funding cannot be the only source of financing for its industry, the CIF has said that the sector can move into sustained growth territory — and create thousands of jobs in the coming years — if “given the right push” in next month’s budget.

“To help get the private sector investing in construction again, we will need the Government’s help. Government can illustrate its confidence by introducing short-term temporary measures to stimulate sustainable construction activity.

“As a consequence, Government will benefit from increased employment, increased taxes, improved economic growth and less spending on social welfare,” Mr Crampton said.

Amongst other things, the CIF wants a temporary reduction in Vat — pertaining to construction activity — to 9% for two years, as a means of encouraging fresh activity and additional private sector investment.

According to the Federation’s director general, Tom Parlon: “If the right steps are taken, we will see the construction sector move to sustainable, measured growth.”