Construction in the Republic will grow at more than 10 per cent this year, and by at least 7 per cent in 2000, according to a review to be published today. But in future, skills shortages could lead to higher wages, dampening growth, the document says.
In January, the Patterson Kempster & Shorthall (PKS) update predicted 8 per cent growth in construction volume for 1999. The latest version, published today, predicts growth of 10 per cent or more in the sector.
Construction is seen by most analysts as a key indicator of business confidence in the economy. PKS, one of the Republic's leading firms of quantity surveyors, is usually conservative in the estimates it makes in its six-monthly updates.
"Significant projects in the industrial sector have led us to revise our forecast upwards to a growth figure of more than 10 per cent," says Mr Michael Webb, PKS' managing partner, in the review.
Tender levels in the first six months of 1999 rose by 3 to 4 per cent, and a higher rate of increase was likely in the second half of this year, he adds.
"Recent tenders have taken into account the general drift in labour costs within the industry as well as some significant materials price increases," he says. "Increases paid to bricklayers and scaffolders have led to other trades looking for similar increases. This trend has led contractors to reflect such increases in their tender prices, particularly for fixed price contracts."
PKS warns that strains were beginning to show in the Irish construction industry due to the lack of skilled labour to a fast-growing sector.
Skilled trades-persons can pick and choose their jobs, and demand payments which would not have been dreamed of four or five years ago," according to PKS. "Profit levels have been grossly exaggerated and expectations raised to unrealistic levels. In some areas, trades unions are losing control as sectional interest groups flex their muscles. The industry as a whole needs to tackle the problem with some urgency."
A number of issues need to be tackled, including training; health and safety; site welfare; career progression; recruitment; and the issue of sub-contracting, PKS says. The document says the negotiations for a new partnership wage agreement may provide the framework for such discussions.
Nonetheless, the review says projections for 2000 have also been adjusted upwards: "In January we forecast 5 per cent growth in 2000. However our current view is that volume growth may be in the order of 7 per cent."
The significance of this figure was that it comes after six straight years of growth of at least 9 per cent, the review adds.
"The housing initiatives including land supply, drainage, water and density will all help to increase the volume of housing construction in 2000. The recently-announced £600 million (#762 million) Public Private Partnership initiatives for roads and bridges are all likely to impact in 2000," he added.
He stressed that without firm information, PKS' figures for 2000 were best estimates.
