I thank the committee for the opportunity to talk with members today. The issue we are here to discuss will be covered in our budget submission, which is currently in draft currently and to which I will refer throughout this statement.
The construction industry underpins the competitiveness and productivity of the domestic economy, therefore, ensuring Ireland has a dynamic construction industry with the capacity to deliver efficiently and cost-effectively is critical.
Where the policy and regulatory environment has made construction financially viable, the industry has responded, delivering high-quality construction for private and public sector clients. The large increase in student accommodation over the past five years and the ongoing high growth levels in commercial property are examples. In areas such as private residential outside the greater Dublin area or in social housing, securing finance is more challenging and this has limited the industry’s ability to deliver the required output.
Getting the policy and regulatory environment right is critical. The national development plan, Project Ireland 2040, Rebuilding Ireland, social housing targets, the Action Plan for Jobs, the regional and rural action plans, the apprenticeship action plan, the deep retrofit programme and Ireland’s climate action strategy require a dynamic construction industry.
As it stands, without proactive measures from the Government to build capacity in the industry, Ireland will not achieve any of these targets.
The ambition in the €116 billion outlined in the NDP, in developing Cork, Limerick, Galway and Sligo as an economic counterbalance to Dublin and in delivering 35,000 homes annually, is being stifled by blockages, challenges and constraints on the industry to deliver these laudable aims.
In the area of civil engineering, the objective is to deliver the infrastructure that connects regions, improve people’s daily lives and enable housebuilding. This sector of the industry has had nine consecutive months of contraction in the Ulster Bank purchasing managers' index, PMI, survey. The commencement of NDP projects is out of sync with the declining state of the civil engineering industry. In delivering major infrastructure, the time between announcement, commencement and completion of works can be decades. The timeline for infrastructure projects is predictably uncertain, yet, despite a huge immediate economic and social demand for infrastructure, and a commitment to invest, the relatively small spends on preparatory works are not prioritised. This will delay projects unnecessarily and ultimately will cost the Exchequer as inflation erodes investment.
After a decade of underinvestment we welcomed the Government’s commitment to infrastructure in the NDP. In normal times this would provide companies with a clear and certain pipeline of work giving the industry the confidence to invest in people, plant and technology.
However, we are not in normal times, that confidence is not present as the civil engineering industry has never really recovered from the recession. Investment in key strategic projects should begin now to mitigate delays that will invariably occur. Collaboration at an early stage is the key to unlocking progress.
The second key area for focus is housing. While significant progress has been made, our housebuilding sector is reporting that a lack of infrastructure is limiting the development of much residentially zoned land. The CIF and its constituent association, the Irish Home Builders Association, is urging Government to increase the provision for the local infrastructure housing activation fund, LIHAF and simplify its implementation.
This initiative has played a major role in opening up development lands for housing and playing its part in increasing housing output by 25% year-on-year for the past couple of years. What is needed now is more consistency in how LIHAF funding is allocated by local authorities across the country to make essential development financially viable for housebuilders to deliver private, social and affordable housing.
The other key policy measure the Government can take to maintain momentum in housing delivery is the extension of the help-to-buy incentive scheme for first-time buyers of new homes. This scheme is due to expire on 31 December 2019. It has had a profound impact on the rate of commencement of new residential scheme units, with a resultant increase in the rate of new housing completions since the introduction of the scheme.
Many housebuilders report that between 40% and 70% of sales of starter homes in their new developments are sold to qualifying first-time buyers who are dependent on the help-to-buy scheme to help assemble the required deposit under the Central Bank macroprudential rules. Without this incentive scheme, the rate of commencement of new homes will fall, as hopeful buyers will fail to have the required deposit to secure their residential mortgage.
Should the Government shelve the help-to-buy scheme, it must then be replaced with an alternative scheme mirroring the shared equity loan scheme that has operated in the UK. This has been a success for both first-time buyers and for maintaining levels of new house building.
The third key area which our submission will cover is people, that is, ensuring we have enough skilled workers in the industry. In mid-2016, SOLAS forecast that the industry would require about 100,000 additional workers over three years to replace those retiring or emigrating and to meet the targets set out for housing in Rebuilding Ireland and in the public capital programme, as it was known. Since then, we have been hiring an additional 1,000 people per month into the industry, coming to around 35,000. The shortfall can only be addressed by increasing the numbers of people entering the industry through the CAO and apprenticeship route, increased use of productivity-enhancing technology and building methods, and sourcing people from outside Ireland and through the diaspora.
Of course, it is equally important that we retain those who are already in construction and to that end, we believe that pursuing the highest standards in health, safety and well-being are essential and should be a core requirement for public contracts.
At present, we believe we have exhausted the live register as a source of labour. We are targeting the diaspora to get people to return home and finally, we are increasing our efforts to attract more young people into construction through activities at primary, secondary and third level, including a national awareness campaign and school competition to be rolled out in 2020.
This is very much a long-term play for our industry. Our budget submission outlines several steps the Government could take to increase the numbers entering the industry in the short term and to enhance the level of technology and modern construction practices in the industry. At the outset, due to the importance of the industry to the wider economy, the Government should allocate surplus funding from the National Training Fund to support technology adoption such as building information modelling, BIM, lean and off-site construction and support SMEs in training and upskilling their staff in addition to increasing the numbers of apprentices in the industry. DIT recently surveyed industry to identify why the number of apprentices remains low, particularly in areas such as plastering, despite a large increase in activity generally. The survey highlighted that in some trades, such as plastering, the apprenticeship model is broken and must be recalibrated. In these trades we recommend that the Government reinstate the student levy for apprentices to allay some of the costs to the small builder who would traditionally have hired the bulk of apprentices in the industry.
Finally, I must sound a warning about the divergence in activity between the greater Dublin area and the regions. The various crane counts show that there are ten times more cranes visible on the Dublin skyline than in Cork, Limerick and Galway combined. This sort of imbalance is concerning on several fronts and demonstrates the huge challenge the Government has in its attempt to deliver on Project Ireland 2040.
The Irish Fiscal Advisory Council is warning that a slowdown is inevitable, yet there are sectors of the construction industry and regions of the country that still feel the cold air of the recent crisis.
Without more connectivity and activity in the regions, we will not have the sorts of dynamic construction companies operating locally to make the NDP and NPF a reality. We can address these challenges but we must do it together and we must start now.