Building blocks in place as construction sector surges ahead

If you’ve spent time in Dublin lately, you can hardly fail to have noticed the proliferation of cranes springing into the skyline. The builders are back in town. Fuelled by a surge in commercial development, Ireland’s construction sector is projected to grow by a colossal 18% this year alone.​

While the streets of Dublin are a hive of activity, however, a different picture emerges outside the capital. A two-tier recovery appears to have left large parts of the country behind, while the building industry is grappling with other issues including a skills shortage, lack of diversity and of course Brexit.

As the industry gets its house in order, the Government has set out an ambitious national development plan in the shape of Project 2040. 10 years on from the crash, Shane Dempsey of the Construction Industry Federation (CIF) explains why the construction sector is in rude health.

Shane, has the building sector now fully recovered from the crash?

On a national level I would say yes, absolutely. The sector has enjoyed 10-14% year-on-year growth over the past five years and that will probably rise to 17% or 18% for this year. Construction is the fastest-growing sector of the Irish economy, which in turn is the fastest-growing economy in the eurozone, so we have definitely moved on from the crash.

There’s a strong pipeline of work as well, with €116 billion allocated to construction over the next 10 years as part of the National Development Plan. That strategy aims to stimulate growth in a balanced way, so it won’t be all in Dublin but in Cork, Galway, Limerick and other parts of the country too.

Does that reflect a concern that Dublin is dominating the construction scene?

Most definitely. The uplift we’ve seen, and are seeing, in construction has not spread outside of Dublin yet. Almost all of the economic growth is concentrated in the greater Dublin area so we’re still looking at a two-tier recovery and that is a problem.

If you look across Dublin, there are 110 cranes in operation at the moment. That’s even more than there were at the very height of the boom. In Cork – our second city – there are six cranes up at the moment. In Galway, I believe there’s one. And in Limerick, zero. So, we definitely need to spread the work around a bit more and that’s a major focus of ours.

Why is it taking so long for the recovery to extend to other parts of the country?

I’d say it’s a legacy issue. Outside of Dublin, there’s been a decade of under-investment along with migration patterns that saw workers leaving rural towns and secondary cities. That’s understandable – Dublin was the only place where jobs were still being created so people had to chase those jobs.

Now that times are better, we’re in a position to address the imbalance and [Finance Minister] Paschal Donohue has set an ambitious target to spread the economic resurgence around.

What is driving growth in the sector?

Commercial property. If you look at those 110 cranes in Dublin right now, I would say 95% of them are working on commercial projects or hotels.

Buy-to-rent is the growth factor in our industry today. That reflects changing lifestyles and demographics, again especially in the Dublin area. Here you have Google and all the tech firms, you have a huge aircraft leasing sector and a booming financial services sector, so it makes sense to have institutional investors who build and then hand over those buildings to rent.

How would you rate the reputation of the construction industry?

I think there’s been a fresh start in terms of reputation. There was probably a residual hangover for a few years [after the crash] but the focus has shifted to ‘how can we get more houses built?’ and that has changed the dynamic. In the last couple of years, there has been much more engagement between our sector and the Government to try and solve the housing shortage. Some new players have come in and we’re starting to get on the right track. But the construction industry reflects the wider economy – it takes time to turn things around.

Is the shortage being addressed?

Yes, definitely. At a policy level, we are working with the Government to overcome the barriers to delivery of new housing. The industry has moved on considerably as has the regulatory framework. At an economic level, people are generally earning more now so it’s maybe a little easier to achieve the level of saving required.

How important is it for you to work with policy-makers?

We work hand-in-glove with the Government in terms of formulating planning and building regulations, which change all the time to reflect changing societal needs. At the moment there’s a debate around whether or not we can or should build up in Dublin. [Housing Minister] Eoghan Murphy has removed many of the impediments to building up but there are still many objections at local level, so that’s an example of a policy area that is still fluid.

Many sectors are experiencing a skills shortage, is construction one of them?

There is a skills shortage in our industry, we’re certainly not hiding that – the opposite in fact. In 2016, we conducted research and found that we would need an additional 100,000 workers in the sector to deliver the Government’s capital building programme of 35,000 new houses per year. We haven’t got to that level of recruitment yet, but we have made progress. Since 2013, the construction sector has employed an additional 1,000 people per month which equates to around 65,000 extra workers over the course of the five to six years.

I think the skills shortage highlights the need to develop much more talent through our own education system, that is the sustainable way to do it. The CIF is rolling out a new ‘careers in construction’ initiative later this year and a big part of that will be to change the image of our industry.

How prepared is Ireland’s construction sector for Brexit?

I would say Irish construction companies, like most other sectors, are struggling to plan for Brexit. We’ve conducted research that found 72% of our members haven’t engaged in any form of Brexit impact assessment, while only 8% say they have engaged with all their suppliers and subcontractors to determine their exposure to Brexit.

Is it surprising that so many are not planning?

It is and it isn’t. Nobody seems to know exactly what is happening with Brexit, so how can a one- or two-man building or engineering firm be expected to know what to do? The second point is that a lot of our members are exactly what I’ve just described – one-man bands or very small SMEs (small and medium-sized enterprises) who would see Brexit planning as maybe a waste of time and money.

From a CIF perspective, however, the threat is very real. You look at any project that is dependent on supplies or materials; even if there are no extra tariffs, most of those contractors are operating on such fine margins that any delay could literally kill the project and take the contractor with them. Even the bigger [contractors] are facing risks. Margins are so tight that there’s no room for error or delay.

So, we’ve been telling our members to get on this urgently, talk to their suppliers whether they are in the UK or here in Ireland and make sure the materials are EU compliant and won’t be subject to delays. Every firm in the construction sector must look carefully and analyse the risk in what they are doing and planning.

What is your #BuildingEquality initiative all about?

This has been going for the past three years, starting on 8^th March each year – International Women’s Day. We’ve been pushing to find 100,000 new workers since 2016 and while we have added more than half that amount, the proportion of women involved in construction has not budged. Only about 5% of our members are female and it’s clear we’re missing a trick.

The CIF has committed to increasing the female representation among our member firms to 25% by 2030 – an incredibly ambitious target but one that I feel is worth striving towards. So, we’re going into companies and really trying to change the mindset, make the workforce more equality-driven. As I always say, these days you’re probably more likely to find yourself with an iPad in your hand than a hammer so the conditions are there, we just need to push a little and open that door.