Dáil Éireann Debate, Thursday - 25 February 2021
95. Deputy Bernard J. Durkan asked the Minister for Public Expenditure and Reform if steps are needed to address potential overheating in the costs for capital projects; and if he will make a statement on the matter. [10897/21]
View answerThe BUILD Reports produced by the National Investment Office in my Department in 2019 and 2020 have highlighted capacity constraints arising in the construction sector in recent years, noting that “potential risks and constraints are present in the form of cost inflation, limited sources of additional labour supply and stagnant productivity growth”.
A key metric to consider is the Construction Tender Price Index, which is based on tender returns for non-residential projects. It is based on predominately new build projects with values in excess of €500,000 across all regions. The Index is therefore a measure of average price increases across differing project types and locations.
In recent years there as been an elevated level of inflation in the Irish construction sector. In 2019 the construction tender price index surpassed its previous peak from 2007. The index was estimated to have increased by 6.6 percent over 2019. However, the rate of inflation slowed significantly in 2020 to 1.3 percent. This is an issue which is highly uncertain at present due to issues including Brexit and Covid-19.
Continued monitoring of inflation and capacity constraints by the National Investment Office in conjunction with the Construction Sector Group will be necessary to inform any policy decisions in this area in the future.
