Ireland’s Growth Rate Expected to Slow During 20/21 Before Rebounding in 2022 - Construction Network Ireland - Construction Network Ireland

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Published in Construction on 12/08/2020

Ireland’s Growth Rate Expected to Slow During 20/21 Before Rebounding in 2022

CNI Editor reports

Although Ireland has moved into Phase 3 of post-COVID-19 recovery, the risk of disruption remains, with delayed project starts and completions, increased fixed costs and uncertainty around workload making future prospects unpredictable. As a result, following years of high inflation, tender price growth is expected to be flat in 2020, with many private sector markets – including housebuilding and commercial development – taking until potentially 2022 to recover.

The analysis comes courtesy of Arcadis’ latest Summer Market View; ‘High Hopes’, in which Arcadis asks whether the recovery measures announced so far will be sufficient to support the industry long term. This quarterly analysis of the Irish construction market looks across sectors and delivers a tender price forecast to facilitate financial decision making for projects and programmes.

The Irish construction sector has been one of the most dynamic European markets in recent years, with rapid price inflation and strong and sustained growth since 2013. Construction price inflation has been increasing at between 6-8% every year for the past 2-3 years and, unlike almost all other construction markets in Europe, these inflationary pressures will need to be absorbed before price falls associated with labour inflation and pricing of risk have an impact. This will help to counter the risk of a downward spiral in response to COVID-19, preventing the scale of correction seen in the last downturn when prices fell by at least 40% in two years.

Assuming a broadly-based economic recovery, it is expected that tender prices will start to rise above cost inflation by 2022, with Arcadis forecasting growth of 3-5% in construction and 5-6% in infrastructure nationally.  Public sector investment is predicted to increase by 10%, but in the shorter term this is unlikely to compensate for a reduction in the pipeline for commercial and residential sectors.

The path to recovery will not be straightforward, and new projects will be exposed to an increased level of risk, not just from potential new waves of infection but also new risks associated with health and safety, productivity, viability, and supply chain stability. Arcadis expects that contractors and their supply chain will continue to take a risk averse approach to business development – focused on quality work rather than work at any cost. This presents an opportunity for clients who are ready and able to work with their project teams to bring forward deliverable projects.

Commenting on the analysis, Sabrina Mackin, Market Lead for Ireland at Arcadis, said “Construction is at a turning point. Clients are reconsidering their business needs, with risks around lower productivity, future COVID-19 disruption to works, and supply chain resilience all having the potential to cause delays and increases in costs. We need a different approach, not just to make sure that projects succeed, but also to ensure the long-term health of the sector.

“Urgent, short term actions to help cushion the impact of the pandemic and save jobs need to go hand- in-hand with more sustainable ways of working. From embedding digital technologies to exploring more collaborative business models, we have a real opportunity here to strengthen the industry. Everyone has a role to play, whether by underpinning demand, creating new capacity, or by enabling the innovation necessary to improve performance and productivity. But it is not just about recovering to a pre-COVID-19 state; we need to push the industry beyond it. The construction sector can potentially come out of the COVID-19 crisis on the wave of change, providing the whole ecosystem is able to come together, commit and collaborate.”

The full Summer 2020 Irish Market View is available to download here.