The Irish Construction Industry in 2017 continues to show positive signs of improvement with output increasing across most sectors of the industry. Industry output is expected to grow to €17 billion in 2017 and forecasts suggest output will reach €19 billion in 2018. The output for 2017 represents 7.5% of GNP and this is still 2.5 percentage points off the benchmark European sustainable level of 10%. We would therefore expect Construction output to increase to €22 or €23 billion by 2020 bringing us back to the normality of 2002 and 2003 before the boom that resulted in the market crash of 2008.
Recovery in private sector has seen major investment in commercial office space and urban centres. Increased activity is also apparent in the hospitality, retail and private health sectors. The public sector has benefited from increases in Public Capital Investment where planned Government expenditure on transport, education, enterprise, housing and health continues to stabilise the construction sector. Semi-state bodies are also contributing to the public-sector capital expenditure.
Tender prices have continued to rise steadily with increases in the order of 5% to 7% per annum depending on the sector. The market continues to be competitive and inflation will likely continue to rise at these levels in the short term.
While the outlook is positive with statistics from the Ulster Bank PMI Report showing marked increases since 2016 there are still challenges that lie ahead. The impact of Brexit with discussion on hard and soft borders, trade agreements and currency fluctuations will have both positive and negative effects on the Construction Industry. The impact of developments in the USA and potential for conflict is also a concern for economies around the world.
Brendan Merry and Partners have witnessed the significant increase in the number of tower cranes particularly in the Greater Dublin Area and the changing skyline of development funded by corporate syndicates, developers and vulture funds. While they are a welcome boom to the industry and employment, the medium and small contracting firms including professional practices struggle to benefit from this niche high end of the market. The Central Bank must keep an eye on the skyline from their new headquarters and make sure we do not have a “Déjà vu” situation in the future.
Brendan Merry & Partners