Building firms slash prices to avoid jobs losses

BUILDING companies desperate to avoid redundancies drove down construction prices by 12% last year by pitching their bids below cost price.

This is according to figures from the largest quantity surveyor in the country, Bruce Shaw Partnership.

It said a similar drop in costs was not possible this year because these techniques were only a short-term option.

The partnership’s annual costing guide for the construction industry said firms are expecting to bring their tendering prices down by up to 5% this year to secure dwindling opportunities.

“Our analysis for 2008 shows that tender levels have fallen on average by 12%, although in some cases falls of over 20% have been witnessed.

“The major fall in tender levels, despite rising input costs during the year, has occurred as contractors and sub-contractors have competed aggressively in order to secure work to retain key staff in a dramatically dwindling market. This has resulted in many tenders being submitted at well below cost,” it said.

Bruce Shaw also said the biggest price reductions this year will happen in rural areas of Ulster and Connaught. It is predicting costs to hold up in the greater Dublin region and increase in the city centre.

And it said the value the Department of the Environment put on the construction industry in 2008 was too optimistic. Instead of e29 billion, Bruce Shaw expects it to be worth e25bn when final figures are tallied.

It has predicted an even worse 2009 with the industry responsible for less than half the e37.4bn peak it hit in 2007.

The figures were contained in the 2008 handbook launched by Taoiseach Brian Cowen in Dublin last night. He said the industry was facing “huge challenges” for the next three years.

And he said it was unlikely the country could return to the status quo it enjoyed during the boom years and a tax system heavily reliant on property.

“We have to continue to restore order in our public finances… it cannot be solved by expenditure adjustment alone… we have to broaden the base of our taxation,” he said.

Mr Cowen also said hard decisions had to be taken not simply involving short-term measures.

“At the moment we have to continue making the decisions in a timely fashion…. [because] we also have to maintain economic activity,” he said.