Construction industry's cost pressure mirror Celtic Tiger era, expert warns

Mitchell McDermott said that all types of costs, including labour costs, are soaring as the number of new workers recruited by the industry cannot keep up with the building output of new offices and houses.

Construction industry's cost pressure mirror Celtic Tiger era, expert warns

The Irish construction industry faces cost pressures that mirror the Celtic Tiger era that ended in an overheating property market and the crash, a consultancy has warned.

Mitchell McDermott said that all types of costs, including labour costs, are soaring as the number of new workers recruited by the industry cannot keep up with the building output of new offices and houses.

The report comes in the middle of the election campaign in which most political parties have pledged to vastly expand the output of houses to meet the housing and homelessness crises.

However, the consultants estimate that construction output climbed 12% to €23bn last year and that the construction workforce expanded by only 6,000 workers, or by 4%, to 150,000.

It warns that 30,000 more workers will be needed if the target of 40,000 new houses a year is to be met in two years, after only 21,000 new houses were built last year.

“Output is outstripping our already constrained supply chain, and this is a worrying trend. In fact, demand is at levels of constraint similar to the Celtic Tiger, especially in Dublin,” said co-author Paul Mitchell.

Mr Mitchell said the evidence showed that the cost of building an office block had soared from €20m in 2015 to over €25m at the start of this year and that the spiralling costs were “not sustainable”.

Its report found that the construction of hotels and offices was close to “full capacity”.

It said that in Dublin the construction of office projects for Salesforce, Amazon, Facebook, Google and the ESB were “to the fore” but warned about the high costs paid for sites for student accommodation.

Meanwhile, businesses in Cork have reported a surge in confidence in the Irish economy in the final quarter of 2019.

The Cork Chamber economic trends survey found that 93% of businesses in the region were reporting confidence in the future compared to 88% in the third quarter.

While there is a decline in respondents reporting an increase in employee numbers, 55% of business report that they expect employee numbers to rise over the next year.

Chamber president Paula Cogan said the survey also found that 39% of businesses had open vacancies with 28% reporting difficulty filling these roles.

As with previous surveys, we note a deficit in skilled engineers across a range of specialisms, and more generally a shortage in experienced managerial level staff.

Pat Horgan at Ulster Bank which sponsored the survey said in relation to turnover, 63% of businesses indicated an increase, with 53% expecting turnover to increase in the first quarter of this year.

“This is a very positive way for Cork business to enter what is sure to be another successful decade.”

“We report Brexit as the number one threat to businesses, followed closely by skills availability,” Ms Cogan said.

“While there are challenges nationally and globally with a question mark over who will be leading out our next government, and the future relationship with the UK, we are pleased to report on the strong confidence, and pragmatism of the Cork business community,” said Mr Horgan.

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