CERTAINTY IN AN UNCERTAIN WORLD

Colm McGrath, Managing Director at Surety Bonds, takes a close look at the Government’s renewed focus on NDP project delivery

The current uncertainty across all markets – created predominantly by the war in Ukraine, the supply crunch lag of the after effects of the Covid pandemic along with central banks around the world trying to get inflation under control – is increasing volatility. To me, the world today seems bonkers. It’s very difficult to see a clear path ahead, particularly as it looks like we’re heading into a protracted war in Ukraine.

As the construction industry contends with subdued market conditions driven by all the issues mentioned above and after several years of cheap money and now soaring prices, there are growing signs of problems in the property markets. That is why I welcomed the Minister for Public Expenditure, Paschal Donoghue’s comments on the 10th of March that he was going to “sharpen the focus on NDP project delivery” as part of his departmental remit. There are so many projects out there – housing, schools, roads, water treatment plants, hospitals and public transport – that need to be either fast tracked or at the very least put into a fixed pipeline of delivery.

To add to this positivity, the construction industry being led by the commercial sector is continuing to expand, albeit at a slower pace. The residential sector is catching up, although well below the required volume of 40,000 units per annum. Close to 29,000 units should be completed in 2023, but there is still massive scope for growth. The benefit of increased levels of supply is the easing of house price inflation which is slowing to a more sustainable pace. The missing piece of the jigsaw is investment in infrastructure. There is huge scope for civil engineering projects which is currently posting the weakest activity of all construction sectors. If a slowdown or even a recession, which looks very unlikely, were to occur than it is obvious that investment in infrastructure is required to support Ireland’s growth. This lies firmly on the shoulders of the Government.

While employment levels within construction continue to rise, the difficulty for the sector is attracting employees. This will lead to an inability to achieve housing ambitions. The minor decline in commercial activity and employees may be just a seasonal glitch, but I get the feeling it’s a bit more than that. Before I get shot for talking the market down which I am not, I do believe there are signs of a slowdown and maybe even a pause in the supply of construction contracts while we wait and see what the outcome of the uncertain times we live in will be. I would also consider that after the flurry of commercial building we have had over the past three to four years, we are in a more mature part of the property cycle. Investors are being more selective in their investments and are increasingly focused on protecting any potential downside, which further impacts on the pace of closing out a deal.

I look forward to seeing the Minister’s plan for the NDP investment of €165 billion and where and when it will deliver vital infrastructure such as housing, schools, hospitals, roads and public transport. The plan should bring some certainty to an industry facing levels of uncertainty in current volatile times.

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Michael McDonnell Managing Editor of Irish Construction Industry Magazine & Plan Magazine

Email: michael@irishconstruction.com      WWW.MCDMEDIA.IE