Pace of decline in construction industry will slow this year

Pace of decline in construction industry will slow this year

The pace of decline of the Irish construction industry will slow in 2013, with a 3 per cent drop in output forecast by construction consultants Davis Langdon. This compares with a decrease of 9 per cent in 2012.

Paul Mitchell, a director with Davis Langdon, says that the 2013 outlook represents relatively good news in terms of curbing the industry’s downward spiral.

“Whilst good news like this is welcome it is not having an immediate effect on the market. Contractors, in particular, are feeling the pressure more so than others as they rely upon live construction projects. In this regard, we have noted that contractors are being a lot more selective about what they tender for due to a lack of resources and high tendering costs,” he said, adding that the availability of performance bonds is also curtailing construction projects.

According to its annual review, Davis Langdon noted that there were 4,000 housing starts and 8,000 completions during 2012 – less than a tenth of the annual total at the peak of the market.

“The majority of residential activity is in the one-off house category and the public-sector housing capital spend has been largely restricted to Limerick and Dublin city regeneration projects as well as repairs, maintenance and improvement of existing stock across the local authorities,” Mr Mitchell said.

Looking at the medium term, Paul Mitchell says that even with a strong recovery in the Irish construction industry, it is highly unlikely to return to the wholly unsustainable levels of the mid 2000s. In this context, Mr Mitchell says that Davis Langdon believes that an industry that accounts for 10-12 per cent of GNP or 8-10 per cent of GDP would be a sustainable one.

“Even if the Irish construction industry grew by an average 10 per cent per annum over the next number of years it would be 2023 – 10 years from now – before we would reach the 12 per cent of GNP mark,” he said, assuming an annual GNP growth of 2 per cent.

Source: Fiona Reddan / The Irish Times

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