The construction industry has been more than halved in size by the downturn and there's no let-up in sight, writes JACK FAGAN

TO SAY THAT the past two years have formed a difficult period for the Irish construction industry is to put it rather mildly.

Amid the fall-out from the collapse in the property market and the worst financial crisis in several generations, most developers have lost fortunes and closed down sites as they await further instructions from Nama.

The fact that the vast majority of developers were caught out is of little consolation because, irrespective of how long site values remain on the floor, bank debts will ultimately have to be repaid.

Many developers, shattered by the financial crisis, are also suffering from a crisis of confidence. They have no idea if and when market conditions will return to anywhere near normal and, with an almost daily parade of developers through the High Court as their companies are put into receivership and liquidation, it seems pretty obvious that many of them will have to pursue a different career in the future.

The severity and abruptness of the property crash led to an immediate lay-off of thousands of construction workers, a trend which has intensified over the past year.

The Construction Industry Federation (CIF) estimates that, of the 287,000 workers directly employed in the industry at the peak in early 2007, there are now only 130,000 still involved.

And, worse still, that figure is set to fall further over the coming months with the completion of a number of major projects, such as inter-urban motorways, the Aviva stadium and the National Conference Centre.

The job losses over the past two years have been even greater when you take into account the thousands of lay-offs in ancillary industries.

One of the few redeeming features of all this is that building costs have plummeted, as those still standing compete for the much reduced volume of work.

Many of the well-run sub-contracting businesses have managed to retain a good proportion of their workers to finish off buildings and pitch for new contracts, such as one-off houses and public amenities.

A Navan businessman, who recently secured planning permission to build a modest enough house in the village of Wilkinstown, got no fewer than 43 letters from contractors within a week of the planning consent. A few came from Meath-based companies but the vast majority were from firms operating in other counties – stretching from Antrim to Waterford.

Many “subbies” anxious to pick up the pieces and get back to work are finding it impossible to get working capital from the banks.

For some of the smaller operators, the credit union is the only option – provided they have a history of saving.

One of the best known firms in plumbing and installing gas central heating in the Dublin area has had its bank funding cut to €250,000 – hardly enough to allow it to proceed with a string of contracts, including work on two national schools.

The CIF acknowledges that undue delays in securing payment for construction work is now “a major problem across the industry”. Martin Whelan says that delays in paying main contractors is having a knock-on effect right down the line to suppliers and sub-contractors. In some instances it is threatening the viability of companies.

Another issue raised by contractors is the decision by banks to pull funding after the initial development work has been carried out. By then many sub-contractors have been geared up and are ready-to-go on site.

The credit squeeze has drastically changed the relationship between many contractors and their clients.

The long-standing trust that was taken for granted has been replaced by bank guarantees and partial payment in advance. No one wants to part with their cash.