SCSI/PwC Construction Market Monitor 201930 April 2019
Tempered optimism for an industry hampered by acute skills’ shortages while Brexit lurks in the background
- 58% of chartered surveyors across all sectors experienced increases in construction activity levels in the last 12 months
- More surveyors working in public housing and infrastructure saw increases in workloads in the last 12 months, with an increasing trend of surveyors reporting that activity is showing some indication of levelling off for private commercial and private housing sectors
- 56% reported that they are operating at full capacity, up from 17% last year
- Skills shortages remain acute and have deteriorated in every sector in the last year. For example, 88% of surveyors said they experienced skills shortages for carpenters, up from 69% last year and 87% experienced shortages for plumbers, up from 70% last year
- Tender price inflation and planning regulation issues are also holding back progress
- Four out of five (80%) said that they continue to have difficulty accessing finance.
- 31% feel they are not prepared for Brexit
- 83% feel positive about the outlook for the industry, of which 61% feel only ‘somewhat positive’
- But capacity constraints are coming home to roost:
- 71% expect workloads to increase in the year ahead, down from 90% last year
- 53% expect headcount to increase in the year ahead, down from 70% last year
- 45% expect profits to increase, down from 63% last year
These are some of the key findings from the 2019 SCSI/PwC Construction Market Monitor launched publicly today. The research represents the views of over 250 members of the Society of Chartered Surveyors Ireland. Chartered surveyors working in the construction sector shared their views on business confidence and priorities as well as a range of important areas for future development which will drive the success of Ireland’s construction sector.
Sustained growth but more to do in private residential and private commercial sectors
Similar to 2018, almost 60% of surveyors reported an increase in workloads in the last 12 months. However, approximately one third experienced no change in the levels of activity in this period.
In the past 12 months, 6% more surveyors reported an increase in activity levels for public housing (2019: 59%; 2018: 53%) with an additional 14% more surveyors reporting an increase in activity levels for infrastructure (2019: 58%; 2018: 44%).
For private commercial (2019: 58%; 2018: 68%) and private housing (2019: 59%; 2018: 71%), fewer surveyors are reporting an increase in activity levels with a growing trend towards those reporting that activity levels remain the same.
Áine Myler, Director General, Society of Chartered Surveyors Ireland, said: “Following Government’s Project 2040 commitments in 2018 to address Ireland’s public housing and infrastructure deficit, it is positive news that we are seeing growth in these vital areas. However, the survey results suggests moderation in the pace of growth for private housing and private commercial Sustained investment, across all sectors - public and private - is key for Ireland’s competitiveness and our ability to continue to attract multinational foreign direct investment.”
Lack of skills seriously hampering growth
Attracting and retaining key talent is the single key constraint hampering growth in the Irish construction industry. The survey highlights widespread skills shortages which have deteriorated since last year. For example, 88% of chartered surveyors reported shortages of carpenters, up from 69% last year; 87% experienced shortages of plumbers, up from 70% last year and 87% had shortages of bricklayers, up from 75% last year. Acute skills’ shortages for electricians and civil engineers also existed and were more severe than last year. See chart in notes to editors.
Joanne Kelly, Real Estate Leader, PwC Ireland, said: “Acute skills shortages in the Irish construction sector have persisted since the recession and continue to be the single biggest obstacle holding back construction output. New initiatives to attract and retain people, including more women, are needed.
“Further significant investment in education and training is required alongside a collaborative effort between industry stakeholders and Government to ensure that the capacity of the industry is expanded and the ambitious investment and development plans as well as much needed residential housing supply can be delivered.”
Tender price inflation and finance also key constraints
With construction costs continuing to escalate amidst already tight margins, the survey highlights that tender price inflation is another key concern for the sector. There is also uncertainty recently around a claim by unions for wage hikes, possibly as high as 30% over three years, to be factored into tendering costs. And despite height restrictions having changed, the survey confirms that planning regulation issues continue.
On the financial side, four out of five (80%) of surveyors said that they continue to experience difficulties raising finance. A large proportion also confirmed cash flow and liquidity issues.
Survey highlights an industry largely unprepared for Brexit
Although the Brexit deadline has been postponed, Irish construction businesses should not get complacent in their planning as a ‘hard’ Brexit is still possible. The survey shows a construction industry largely unprepared for Brexit. At the time of conducting the survey, nearly a third (31%) of respondents said that their organisation was not prepared for Brexit while 60% were just ‘somewhat prepared’.
Joanne Kelly commented; “With thousands of Brexit associated jobs already secured in Ireland, Brexit should continue to bring opportunities. Continued investment in key infrastructure projects, including regional development, is critical to ensure that all businesses in the Irish construction industry can benefit from the opportunities that may arise post-Brexit.”
Future outlook: tempered optimism
Over eight out of ten (83%) respondents feel positive about the outlook for the sector for the year ahead, albeit 61% of these felt just ‘somewhat positive’. But the survey highlights that capacity constraints are coming home to roost: 71% expect workloads to increase in the year ahead, down from 90% last year; 53% expect to increase headcount in the year ahead, down from 70% last year and 45% expect profit margins to increase, down from 63% last year.
Áine Myler concluded: “The Irish construction industry is a key component for our economic growth, driving employment and Ireland’s foreign direct investment pipeline. While there is strong activity which is set to continue, we have an industry that is working at below capacity, largely held back by skills’ shortages. Tender price inflation, access to finance and cash flow constraints as well as planning and regulatory challenges are also curtailing progress. In the long grass is Brexit, this uncertainty has not gone away and the industry needs better preparation for a potential ‘hard’ outcome.”
“Ireland’s construction industry has shown itself to be resilient and continues to be an attractive target for private investors, both domestic and international, who are seeking opportunities to make significant, increasingly long-term, investments in the Irish real estate market. However, continued investment across the various sub-sectors and in education will be key to ensuring Ireland can continue to compete on the international stage and secure foreign direct investment.”
Notes to editor
The survey was conducted in February 2019 having over 250 participating chartered surveyors who are members of the Society of Chartered Surveyors Ireland. These professionals work in the property and construction markets in large corporate firms, construction agencies, government bodies and financial institutions. The respondents are a mix of quantity, building, project management and planning & development -chartered surveyors. The SCSI and PwC would like to thank all those who contributed to the research for their time.
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