Uisce Éireann has asked the Government for a €400 million boost to its €1.4 billion budget this year, amid industry warnings that surging inflation in water projects has “compromised” housing delivery.
The State water authority has scaled back work on big investments as it confronts a rise of up to 35 per cent in construction costs, far above the general inflation rate.
Such moves have prompted criticism within the construction trade about backsliding in the huge, years-long project to upgrade and expand the State’s creaking water infrastructure.
The reduced activity led the main builders’ lobby group, the Construction Industry Federation (CIF), to intervene this week. It warned Taoiseach Simon Harris of “serious concerns” about the impact on housing targets, the Government’s top political priority
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The price of some materials used in water projects by Uisce Éireann, formerly known as Irish Water, has risen 60 per cent.
Despite a recent slowdown in the rate at which prices are rising, the utility said it still expects construction inflation will “remain volatile for the foreseeable future”.
With a general election on the way, Uisce Éireann’s demand for new money heralds tricky decisions for the Government as it faces competing claims for funding in the countdown to the October budget. Although Minister for Finance Jack Chambers has set aside €1.4 billion for tax measures and €6.9 billion for additional spending, he faces multiple requests for extra money.
In addition to seeking a supplementary budget for 2024, Uisce Éireann is also in talks with the Government about a new investment plan for 2025-2029.
The investment plan for 2020 to 2024 came with a €5.3 billion cost. Given rapid construction inflation, it could cost more than €7 billion to maintain investment at existing levels over the next five years. The costs may well exceed such amounts because Uisce Éireann is pressing to escalate work on big schemes such as the Greater Dublin drainage project.
The utility has acknowledged the impact of inflation, saying it was “engaging” with the Government to ensure sufficient funding for its investment plan.
“Similar to other organisations and reflecting the global environment, Uisce Éireann has been impacted by higher inflation which will necessitate an increase in funding to reflect increasing costs across the construction sector,” said the company. “In addition, a range of additional water services activities will require further increases in funding.”
[ Uisce Éireann: ‘If anything happened to the river Liffey, we would be in trouble’Opens in new window ]
Uisce Éireann issued the statement in response to a letter from the CIF to the Taoiseach in which the builders’ group said the State’s water capital programme was “significantly compromised and constrained” because of the rising cost of materials and labour.
“The delivery of housing will be compromised because planning authorities will be forced to withhold planning permission due [to] insufficient capacity in the system,” CIF chief Hubert Fitzpatrick wrote in a letter on Monday to Mr Harris.
“Every housing unit requires both a water and waste-water connection and there is currently zero resilience in the State’s water and waste-water infrastructure,” said Mr Fitzpatrick.
“Contractors are now transferring resources into other sectors. Some have already transferred skilled resources to similar work across in the UK, where recent draft determinations from the UK regulator signal record investment in the UK water sector.”
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