As Irish economy continues to improve at a solid pace, and the construction sector is once again a key pillar in this sustained economic improvement, it will continue to play an important role in the country’s economic recovery, which is growing at the fastest rate in Europe.
The Ulster Bank Construction PMI rose to 58.7 in September 2016 from 58.4 in August, helped by quickening growth of new business. Rising workloads fed through to increases in purchasing activity and employment, while sentiment around the prospects for future growth remained strongly positive. Civil engineering saw a welcome return to growth, albeit at a weaker pace than the sharp rates of growth which continue to be reported in the commercial and housing areas. Total construction activity has now risen in each of the past 37 months. Construction PMI in Ireland averaged 58.52 from 2013 until 2016, reaching an all-time high of 68.80 in February of 2016 and a record low of 43.40 in June of 2013.
There has been numerous strategy documents published by Government in recent years, containing plans to tackle the deficit created in the construction industry during the recession. These are namely the Construction 2020 Strategy aimed at restoring a properly functioning dynamic and sustainable Industry; the
€3.8 billion Social Housing Strategy outlining how the provision of 35,000 social housing units will be delivered by 2020; the Capital Investment Plan for 2016–2021 which promises to provide €42 billion for key public sector infrastructure projects and support over 45,000 construction related jobs, and the latest announcement of €5.5 billion for social housing and infrastructure.
According to a recent report from DMK Economic Consultants for the Construction Industry Federation (CIF) the overall volume of construction output is forecast to increase by 12.5% this year, followed by 8.5% in 2017 and 7.1% in 2018. The average annual growth rate in the period 2016 – 2020 is projected at 9.1%.
There is a substantial pipeline of projects at all stages from pre-planning through to commencing On-Site in the Residential, Commercial and Industrial sectors in particular This is as a result of the country’s continuing economic recovery from late 2013 and increasing population. The sector is set to embrace the most positive forecast in over a decade.
The management of this renewed confidence is dependent on the continued focus in addressing the availability of skilled construction workers; the provision of finance for the funding of private sector projects; the removal of unnecessary delays in delivering on the aforementioned housing and capital strategy plans; the capacity of Tier One contractors to deliver the approved projects; tender price inflation and contingency planning for any potential impacts as a result of Brexit.
Finally, the recent Bulletin from the Central Banks contained the first post Brexit forecast for the Irish economy, which stated that GDP will grow by 4.9% in 2016 and 3.6% in 2017. This is a reduction of 0.2% and 0.6% respectively in each year on their earlier forecast. The Central Bank, despite these downward projections as a result of Brexit, remains broadly favourable on the outlook for the Irish economy in the short-term.
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