The
construction industry now accounts for around one quarter of
Ireland’s
economic activity
and has become a major growth sector within the context of the
overall economy. As a percentage of GDP, construction output
represented around 19.5% in 2006 and 13% of the national labour
force are now engaged in construction activities. Although now
slowing, output of Ireland's construction sector has risen rapidly
over the past decade, with strong demand for residential, commercial
and infrastructure development, underpinned both by rapid economic
growth and by the country's demographic profile.
The
value of output in the overall construction industry during
2006 was estimated to be around €36 billion, which represents a 15%
increase on the previous year when the value of output stood at
€31.5 billion. The value of output in the construction industry is
forecast to increase to €38.8 billion in 2007, which represents an
increase in value terms of almost 8%.
Current
estimates suggest that output in the Irish construction industry
will begin to slow in 2007, with output values up just 8% to reach
€38.8 billion. After that, the industry is expected to slow in 2008
and 2009 to reach output values of €38 billion and €37.2 billion
respectively.
In 2006 the key driver of growth
again, was the house building sector with current
indications suggesting that the number of residential completions
could be higher than in 2005, around 92,000, contributing to a total
estimated output value of €24.1 billion for the sector, around 67%
of total construction output.
The private
non-residential sector, which includes all industrial,
commercial, agricultural, religious and leisure construction output
has been one of the growing sectors in the construction market,
accounting for 11% of output at €3.9 billion in 2006, including RMI
work. This growth represents an
increase in output of 13% since 2005 driven by a
resurgence of the commercial sector, buoyant economic
conditions boosting employment growth and
considerable new activity in the hotel and tourism sector.
Strong consumer expenditure growth and growth in real incomes
continued to boost the demand for retail space in 2006, with
significant amounts of development under construction or planned
over the 2006-2007 period.
The value of construction related
investment associated with new social infrastructure projects
reached an estimated output value of €2.3 billion in 2006. There
has been a substantial increase in the level of
investment in new works, alterations and additions under the
Public Capital Programme, while investment in
local authority services has been boosted by spending under the
Waste Infrastructure Capital Grants Scheme.
Productive
infrastructure
is also expected to rise by around 11% during 2006 to reach an
output value of €5.8 billion, boosted by the first public
transport projects under the Government's ten-year transport
investment programme, Transport 21, published in November
2005.The overall performance is led by roads and energy, where the
value of construction related investment expected to rise to €2.2
billion and €1.6 billion respectively. Investment in road and energy
projects account for almost three-quarters of the total value of
construction investment in this civil engineering sector.
Construction
employment over
the last decade or so has experienced sustained growth and has
substantially exceeded the rate of overall employment growth
in the economy since Q2 2003, according to the
Quarterly National Household Survey issued by the Central
Statistics Office. At its peak in Q2 2005 construction
employment growth reached almost 18% year-on-year. The most recent
figures (Q3 2006) show construction employment at 277,800,
representing around 13% of persons employed in the total Irish
economy. In Q3 2006 the
total number of people at work in the Irish economy was just under
2.1 million compared with 1.9 million a year earlier.
The current
construction employment figures, recording a 13% average increase in
2005 and a 10% increase in 2006, are supported by the exceptional
growth in building and construction output, estimated at over 15% in
2006. Forecasts for 2007 predict that whilst growth in employment
levels in construction will remain relatively high, they will begin
to slow from current levels of around 10% to 8% in 2007 reaching
around 300,000. The rate of growth is expected to decline further to
around 6% into 2008 and 2009 as construction output levels fall.
The recent
announcement of the new National Development Plan to cover
the 7 year period until 2013 should stimulate construction activity
in the public economic and social infrastructure sectors through
increased investment in transport, environmental services, and
housing, education, health, childcare and research and development
areas. The construction industry will undoubtedly benefit from the
Plan, with levels of investment reaching around €184 over the 7 year
period.
As expected, this second Plan
contains a strong emphasis on infrastructure investment, with almost
€80 billion or 50% of 2007 GNP budgeted for infrastructure spending
(both economic & social) over seven years.
On a
regional basis,
around 71% of
the total output for Ireland was generated in the Southern and
Eastern (S&E) region compared with 29% generated in the Border,
Midlands and West (BMW) region. One-quarter of the total output was
generated in the Dublin region in 2005 and only two regions
represented less than 10% of the total: Midland (7%) and Mid-west
(8%) The West, South-east, Border, Mid-east and South-west regions
accounted for 10%, 11%, 12%, 13% and 14% respectively of total
construction output. The regional breakdown of construction output
in 2005 is broadly in line with the regional population distribution
according to the 2006 Census. The exception is Dublin which
currently accounts for one-quarter of the total construction output
and 28% of the total population.
The Irish
Government is committed to developing the Public Private
Partnership (PPP) process as a viable procurement option for
appropriate projects under the National Development Plan (NDP),
although progress in some areas has been slower than in the United
Kingdom. The Government has set
ambitious targets for Central Government PPP financed investment in
the NDP, which provides for some
€13.35 billion
in PPP funded capital investment over the 2007-2013 period, of which
€7.0 is project to be spent on Ireland’s transport infrastructure.
The case for
the development of PPPs in Ireland has been strengthened by a
prolonged period of economic growth in the Republic over the past 10
years, which has placed additional pressures upon the Country’s
infrastructure, especially in roads and public transport.
The supply
structure for the Irish construction market is highly fragmented
with a large number of small to medium sized companies, many of whom
specialise in repair and maintenance activities and operate on a
regional basis, with just 12-15% of the estimated 6,000 construction
firms employing more than 20 people. The sector is so fragmented
that it is estimated that, with the exception of John Sisk and
Sons, no one concern has more than 3% of the market, and, unlike
the UK market, which is dominated by a dozen or so large, quoted
companies with separate commercial, civil engineering and
house-building operations, the Irish market is characterised by a
number of smaller companies who operate across both residential and
commercial sectors.
The fragmented
nature of the Irish construction industry has been further
complicated by the practice of larger contractors employing
specialist subcontractors rather than expanding their own labour
force. It is also estimated that around 42% of total construction
output is undertaken by contracting firms employing more than 20
people, with the remainder being undertaken by smaller firms.
Ireland’s leading 150 construction
firms turned over more than €9.28 billion (29% of total construction
output) in the last financial year for which comprehensive data is
available (2005), up from €8 billion in 2004, confirming that
Ireland’s construction sector continues to boom. It is estimated
that the aggregate turnover for total construction firms in 2005 was
almost €15 billion (2004 -
€12.4 billion).
The Top 20 Irish construction
companies turned over more than €5.5
billion (around 17% of total construction output), of which the top
5 contractors accounted for around €3 billion, representing 55%.
The main
players include John Sisk & Son, McInerney Holdings Plc,
Pierse Contracting, Michael McNamara, Ascon
Contractors, P J Hegarty, P Elliott & Co., John
Paul Construction, Roadbridge, John Fleming
Construction, G & T Crampton and SIAC Construction.
