The value of output in the construction industry rose by 14% to just over €12 billion last year and a new report by consultants AECOM predicts growth of a similar order this year. The upturn has been concentrated in the Dublin area, the report states. It also warns of a potential lack of capacity to deliver large-scale projects in the near future. Insolvencies in the sector involving a number of big players and significant scaling back of their operations by others will constrain the ability to deliver high-value, fast-track projects in the €100m plus bracket, according to AECOM.
AECOM's head of programme for cost and consultancy in Ireland, John O'Regan, says the news is pretty positive for the construction industry, which has seen growth for the last four years. The last four years has also seen growth in construction employment - driven mainly by growth in Dublin and primarily by the foreign direct investment sector. Mr O'Regan said that growth was seen across all the sectors last year and across all the regions of the country. He predicts continued growth for 2016, adding that inevitably the hotspot will be Dublin again. AECOM is also predicting that the value of output will grow to €15 billion this year - an increase of over €2 billion.
But Mr O'Regan warns that there is a risk in terms of capacity of the industry, with some signs of strain already becoming evident in terms of some specialist areas and in the large fast-track projects. He says that an increase in construction output of about €2 billion will generate growth of employment of around 20,000 people. There are potential risks of delays as well as cost escalation and it is up to the industry to increase its capacity to deliver, he states.
Mr O'Regan says the output of the construction industry fell to a very low level, adding that its capacity also fell. The industry has been growing over the past few years but to take the big step it is looking to take this year will bring challenges and the industry will need a high level of returning emigrants to fill the available positions, he cautions.
On tender prices, Mr O'Regan says that construction prices fell to unsustainably low levels at the trough of the downturn, but they are now returning to sustainable levels and AECOM is forecasting tender price inflation in the order of 6% this year. He said that is probably bringing the industry back to a level where it is unsustainable but not uncompetitive.
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MORNING BRIEFS - Food company Greencore, headquartered in Ireland but listed in London, recorded 7% revenue growth to £356m over the three months to the end of December. A trading statement published this morning says the business had a good start to the year in both the US and the UK, its two key markets, and that investments in a new facility in Northampton and another in Seattle are progressing according to plan.
*** A tax-driven takeover deal involving US company Johnson Controls and Cork-based Tyco International provided ammunition for both front runners for the Democratic Presidential nomination overnight. Milwaukee, Wisconsin's Johnson Controls is a specialist in energy storage and building systems such as air conditioning. It has agreed a $20 billion deal to merge with Tyco International, a provider of fire prevention and security products. The deal is structured in such a way that Tyco, by some distance the smaller of the two companies, will acquire Johnson allowing it to move its tax domicile to Ireland and save up to $150m a year on tax according to the two firms. Responding to news of the deal, Hillary Clinton said she would introduce an "exit tax" to deter such deals, which are known as tax inversions, if she were elected president. Vermont senator Bernie Sanders went further, calling both Johnson Controls and Tyco "corporate deserters".
