In the third of a three-part series on the construction sector, Barry O'Halloranasks whether the National Development Plan's infrastructure projects can fill the gap left by the slowdown in housebuilding

Building is the Republic's single biggest industry. Last year, it generated €36 billion, a quarter of the total wealth created in the State, which means that one in every four euros earned or made by businesses or people here last year came from construction. It employs more than 280,000, about 13 per cent of all workers.

It got to this point on the back of the economic growth of the last decade. As the money began to flow into the State, much of it from multinational investors, demand grew for offices, industrial units and other facilities.

As more jobs became available, the growing number of employees began to look to buy homes, and as Irish cities and towns grew on the back of the boom, so did the demand for services such as shopping centres.

As the activity stepped up, the weaknesses in the Republic's infrastructure became more obvious and the Government was forced into developing this, which lead to even more building.

The State also helped by providing tax breaks for urban regeneration, holiday homes and hotels. The number of cranes over the cities became a kind of unofficial economic benchmark.

So the industry reached the point where many observers believed that construction was too big, particularly in the housebuilding sector, which is already showing signs of slowing.

Last week, Goodbody Stockbrokers economist Dermot O'Leary said this slowdown was happening faster than anticipated.

He has revised down his prediction for the number of new homes that would be built here this year by 4 per cent to 75,000, with a further fall to 60,000 by the end of 2008 - down from a peak of 90,000 in 2006.

O'Leary says this is partly based on what builders have been telling the stockbroker. "We have found evidence that some projects are either not being finished or left idle in the anticipation of a pick-up in demand in the coming quarters."

(A new house is regarded as "completed" when the electricity is connected.)

Construction Industry Federation (CIF) president Hank Fogarty says that the record levels of housebuilding reached in 2006 could not continue. "Everybody realised that housebuilding was unsustainable at that level," he acknowledges.

Alongside that, many observers also believe that having such a big overall construction industry is unsustainable.

O'Leary points out that the sector accounts for 12 per cent of the wealth generated in Europe, which means it is half the size it is here. "Ireland is clearly out of sync," he says.

He agrees that our poor infrastructure and housing shortage mean the Republic is likely to have a bigger construction industry than other European countries, but he says the federation finds it difficult to justify the current dependence on the sector.

Dr Peter Stafford, CIF research and policy executive, agrees with the view that, with the level of catch-up needed in infrastructure and other areas, construction will continue play a bigger role in the Irish economy than in other European countries.

The federation believes there is still a lot of building to be done here before a range of services are brought into line with those in other EU countries.

For example, retail development is an area that is continuing to attract investment.

This element of the business is a key part of commercial building, worth about €6 billion a year overall.

Last year, one report described it as the "jewel in the crown" of that particular sector, as it has been a consistently good performer.

The view is that the Republic needs, or can take, more shops. However, Jones Lang LaSalle, the multinational real estate agency, recently said the State has the third-highest level of shopping centre space in Europe, and there is almost 600,000sq m (1,968,000sq ft) more space due to come on stream here, half of it by the end of 2007.

That development has not been level across the country. Louth has the highest density, Cork, Dublin, Limerick and the southeast all have similarly high levels. Counties surrounding Dublin meanwhile have less density, indicating some scope in these areas, as there is in parts of the west, which have less again.

Fogarty says that there is no sign of slowing demand for either retail or general commercial building such as offices and industrial units. You could argue that concerns about the size of the construction industry are misplaced, or at least missing the point.

Building got big because the economy got big. The industry's future and thus the future of the businesses and jobs it supports, is tied in with that of the rest of the economy.

But here's where we start to go in circles. The economy's own prospects are tied to its general competitiveness, which will in turn be partly influenced by its infrastructure.

Bad roads, poor public transport, inadequate ports and airports all drive up costs and become factors in making the Republic less attractive to investors, who will either not put their money here at all, or worse still, start taking it back out.

The new National Development Plan (NDP) is designed to deal with this problem. This will see the Government attempt to spend €184 billion over the next seven years, with the bulk of that cash going on projects that will involve building and civil engineering work.

The plan includes projects in areas such as public transport, waste and water treatment, vital by any standards, but particularly so for the building industry, which in some respects is betting on it to fill the gap that will be left by a housing slowdown.

The only problem is delivery. The Government failed to meet many of the targets set out in the 1999-2006 plan. "We've no quibble with the NDP at all, we think it's a good plan," says Fogarty.

"But what we would like to see is co-ordinated, focused delivery."

By this he means what many people call "joined-up thinking". This simply involves co-ordinated planning, so for example, if two projects require you to dig up the same street or stretch of road, you do the two things at once, instead of digging it up on two separate occasions.

Fogarty points out that the industry has plenty of people with the skills to help the Government to manage this.

"What we would really like to do as an industry is to sit down with the Government and help them achieve this. This is not us asking for a handout, we could make a genuine contribution to this," he argues.

The industry would generally welcome last week's news that a range of key projects are going through the critical infrastructure planning process that is being managed by An Bord Pleanála.

However in some cases at least, you're guaranteed that that will only be the first of many hurdles that projects will have to jump before anyone puts a spade in the ground or starts to prepare a site.

Only time will tell if the plan is going to deliver for the industry and the rest of us.