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European construction sector observatory – Ireland report

The construction sector plays a key role in Europe’s economy, and it is shaped by the policy measures taken by national governments. The European Construction Sector Observatory (ECSO) is a COSME initiative that analyses the construction sector in the 27 Member States and the United Kingdom. It aims to provide valuable insights on market conditions and policy developments. Check out the most recent materials.

ECSO has been actively observing the EU construction sector since 2015.

The observatory

  • monitors market conditions and trends, and keeps track of the national and regional strategies designed to achieve the objectives of “Construction 2020” – the EU’s strategy for competitiveness of the construction sector;
  • encourages knowledge sharing and the replication of good practice – and
  • promotes policy measures and initiatives that benefit the construction value chain.

The European Construction Sector Observatory aims to assess the EU construction industry by developing different types of content:

  • Country factsheets: an analysis of key figures, macro-economic indicators, economic drivers, issues and barriers. They also cover innovation, national and regional policy and gauge whether national policy meets the “Construction 2020” objectives.
  • Analytical reports: a broad analysis of the socio-economic and environmental performance of the construction sector. They include recommendations for possible strategies to improve the sector’s competitiveness.
  • Trend papers: an overview of the main trends in the construction sector, such as the integration of digital innovations or the transition to a circular economy.
  • Policy measure factsheets: An analysis of specific measures to be taken by EU countries to stimulate job opportunities and growth in the construction sector.

Ireland

The Irish economy has recorded a solid growth in 2018, with the GDP rising annually by 7.5%. This is driven by enhanced employment, private consumption, alongside strong investment in construction. Although forecasts for the sector, as well as for the general economy, remain rather positive, uncertainty persists, linked notably to the outcome of the Brexit negotiations.

The construction sector has become the fastest growing economic activity in Ireland over the past three years. The number of enterprises in the broad construction sector in Ireland reached 95,781 in 20182, 29.6% above the 2010 level. The volume index of production of the narrow construction sub-sector increased by 52.5 index points between 2010 and 2018, marking a 47.2% increase from the 2015 levels. As a result, the turnover of the broad construction sector in Ireland amounted to EUR 41.9 billion in 2018, a 54.8% increase, compared to 2010.

  • Number of enterprises in the broad construction sector between 2010 and 2018: 29.6%
  • Turnover growth of the broad construction sector between 2010 and 2018: 54.8%

In the aftermath of the crisis, investments in the broad construction sector experienced a 44.3% increase between 2015 and 2018, a 54.5 index point increase between 2010 and 2018. Investments in dwellings experienced an increase of 83.8% between 2015 and 2018, a 36.5 index point increase between 2010 and 2018. Investment in non-residential construction and civil engineering, on the other hand, increased more slowly, by 30.0% over the 2015-2018 period. In 20184, the broad construction sector was estimated to employ 237,548 persons, a 52.2% increase compared to 2010, thus showing a strong recovery from the low levels recorded in 2012 (i.e. 139,555).

  • Total investment in construction evolution between 2010 and 2018 (index points): 54.5
  • Number of people employed by the broad construction sector between 2010 and 2018: 52.2%

The Irish housing market experienced one of the longest and strongest lasting house price increase in the EU-285. The onset of the crisis led to a housing market crash, with the house price index dropping by 53.0% between 2007 and 2012. It has since then recovered, growing by 31.4% between 2015 and 2018.

According to Central Statistics Office (CSO), new dwelling completions experienced a Year on Year (YoY) increase of 22.0% in third quarter of 2019, compared to the previous year, reaching 5,667 dwellings. The increase was specifically driven by a 81.1% increase in the number of apartment completions during the same period6. However, it should be noted that this is coming off a very low base.

Even with this increase in housing supply, there is still a long way to go to satisfy the housing demand. For instance, in terms of social housing, the supply stood at 10,000 homes for a demand amounting to 72,000 in 20197. To tackle the housing shortage, the government launched the Rebuilding Ireland Action Plan, aiming to deliver 47,000 new social homes by the end of 2021. This would amount to an average of 25,000 new dwellings per year. Moreover, the National Asset Management Agency (NAMA) plans to fund the delivery of up to 20,000 new units until 2020.

The need for continued provision of housing will increase in the future, to cater for the estimated 1 million people projected to be living in the country by the year 2040 as forecasted by the National Development Plan Project Ireland.

  • House price index between 2015 and 2018: 31.4%

Despite the strong recovery of the construction sector, the civil engineering segment has not developed at the same pace as other construction activities, partly due to previous fiscal austerity measures. In fact, the Construction Industry Federation of Ireland (CIF) indicate that, in 2018, the commercial and civil construction sector increased by half the rate of the housing sector8. However, prospects remain positive with the introduction of the new Project Ireland 2040. The latter plans a total investment of EUR 116 billion for public infrastructure and capital works between 2018 and 2027.

The Irish construction sector suffers from a shortage of skilled labour, requiring an additional 112,000 workers by 2020. This will be a key challenge to address, to ensure the growth of the construction sector. Initiatives including the National Skills Strategy 2025 and Action Plan for Jobs aim at improving and expanding workers’ skills, including digital skills.

The revival of the Irish construction sector, underway since 2013, is expected to continue over the coming years. This will be driven by increasing residential and infrastructural investments planned over the next ten years. Upskilling of the Irish workforce is of paramount importance for the sector to remain competitive.

Source – European Commission

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