Ronan O’Brien Reports
The South Eastern Branch of the Construction Industry Federation (CIF) held its annual construction dinner in the Tower Hotel on Friday last, February 15th with 200 attending. The event is the construction industry’s largest regional event and brings together stakeholders from all areas of the construction industry. Local construction companies joined dignitaries such as Waterford City & County Mayor Declan Doocey (FG), Council CEO Michael Walsh, Senator Paudie Coffey (FG), CIF Director General Tom Parlon and CIF President Pat Lucey. CIF Chairman John O’Shaughnessy of Clancy Construction hosted the event.
In his speech Michael Walsh spoke of the significant investments that have been happening in Waterford with nearly €500 million invested in the county over the last four years.
Under the Government’s National Planning Framework (NPF) Waterford is designated as an urban centre for expansion (as reported on News 6), meaning the county will get extra attention when it comes to infrastructure investment. This could see the population of Waterford growing from 55,000 to 80,000 people by 2040. Pat Lucey called on the Government to supply the necessary capital expenditure that is required for the new bridge across the Suir. This will facilitate the North Quays development, which could see another €500m being invested in the county.
Mr Lucey said he is looking forward to the completion of the New Ross and Enniscorthy By-Passes which will provide further connectivity in the South East and help create a more cohesive region with a superb motorway network running North and East.
Following Brexit – if it does occur – the South East will have a unique opportunity with both Rosslare and Waterford Ports, two of our closest ports to Continental Europe, with a superb road network connecting these ports to the national roads and the rest of the country. “There is a unique opportunity for the South East to capitalise on its existing infrastructure and the infrastructure that is about to be completed so that we can better utilise the South East’s relatively close proximity to the European markets,” said Mr Lucey.
In his speech John O’Shaughnessy outlined how Construction Industry output grew by 14% in 2018 while a further increase of 20% is expected in 2019 to give an output of over €24bn. “If this comes to pass, this year the construction industry will represent over 8.5 per cent of GNP,” he said. “There is still large scope to grow however as a growing economy needs construction delivering 12% of GNP. Some 150,000 are employed in the industry, with 10 per cent of these employed in the South East, highlighting the importance of the industry to the region. A further 18,000 construction jobs were added in 2018 alone, the fastest increase in employment from any other sector in the Irish economy.”
While the current growth pattern is causing concern in the industry in relation to its ability to secure the necessary resources for our growth, the industry never failed to deliver on previous National Development Plans, he noted.
“And once a strong pipeline of growth is visible it will allow companies to plan for the future and invest in our staff, plant and equipment.” The improving economy has meant Ireland is now at almost full employment. The construction industry faces a significant challenge in attracting new entrants into construction. “In 2018 we had only 81 blocklaying apprentices, 27 plasterers and 29 painting and decorating apprentices nationally. There are numerous reasons for this, for example most second level students are being pushed by both their parents and their school to go to third level education,” Mr O’Shaughnessy added.
To help improve the numbers taking up apprenticeships, the CIF have launched an apprentice sharing scheme. Initially piloted in the South East Region, the scheme involves three or four local construction companies forming a consortia. The apprentice is hired by one company but can quickly switch temporarily to another company to ensure they see out the four years of their apprenticeship without any delays. Similarly, third level construction courses have also seen a significant drop and there are simply not enough graduates and apprentices coming into the industry to build the thousands of houses and infrastructure projects that are required to meet the Government’s ‘Project Ireland 2040’ plan to ensure continued growth in our economy.
Housing output has increased by 25% in 2018 but this is significantly behind the Government’s own ‘Rebuilding Ireland Plan’, which has a target of 25,000 units per year to 2021. A total of 18,000 units were completed nationally last year but 60% of these were in the Greater Dublin Area and eastern region. A total of 427 residential units were completed in Waterford. It is estimated that the economy needs in excess of 35,000 units per year.The reasons housing construction is not meeting demand are many: the Central Bank rules, available infrastructure, planning issues and in recent months we have seen the availability of water supply to be a considerable problem in some locations in the South East region alone.
The main reason for the lack of housing supply is the viability of building new homes. The costs of financing a development, land costs, material and labour costs, and new regulations have also added to the input costs of housing, with NZEB now being a factor that developers must take into account. The problem is of course, these additional costs are not recoverable as the central bank rule puts a cap on house prices, thus these additional input costs are not recoverable by the developer, making projects unviable. This problem is even more pronounced in the regions. The Government have tried to address these issues with several initiatives, such as the Land Development Agency, Home Build Finance Ireland, affordable housing schemes and the Help to Buy Scheme for first time buyers.
All these initiatives are welcome and should help to increase supply over time, but the Government have failed to do anything about the increased input costs which they have significant control over. Almost 40 per cent of the purchase price of a new homes goes to the State in various form of taxes and levies. If the central banks rules don’t change which controls house prices and the input costs continue to increase, private residential projects will continue to be unviable, thus a continues lack of supply. Therefore, that leaves one other option which the Government have control over, reduce the input costs.If we cannot provide the much need housing it will not alone continue to have a serious impact on the homelessness crisis, but it will also have an impact on economic growth, with Brexit just around the corner, we as an economy should be doing all we can to ensure we don’t lose investment from FDIs due to a lack of housing.
Ronan O’Brien sits on the Executive of the CIF’s Southern Region