76% of construction companies in Ireland have reported a year-on-year increase in labour costs, while 64% have seen a rise in the price of raw materials.
Despite the many challenges facing the sector, the latest outlook from the Construction Industry Federation reveals that half of companies remain positive.
The survey for the third quarter of the year shows that turnover and employment figures in the sector continue to rise.
"Regrettably, increasing costs in the form of labour and raw materials continue to put upward pressure on pricing across all sub sectors," said Hubert Fitzpatrick, Director General of the Construction Industry Federation.
"It's likely that unsustainable cost increases in labour and materials could affect the viability of some projects," he added.
Increasing costs continue to impact on the pricing of projects, with 51% acknowledging a year-on-year increase and 38% expecting continued increases in 2023.
Meanwhile, access to skilled labour, securing a healthy profit margin on projects and the increased cost of raw materials remain the three most significant challenges.
Respondents observed an increase in housebuilding, civil and general construction, and a decrease in commercial development.
Some respondents identified a healthier pipeline of work expected to emerge by the second quarter of next year, but warn of a potential slowdown in the civil engineering sector, if some key projects get delayed in the planning process.
Respondents signal that these and other planning delays, funding issues, stalled public projects and access to skilled operatives will continue to challenge the sector throughout 2024.
"With the uncertainty surrounding current global events and economic headwinds that may slow the growth of the economy in the short term, the recent investment funds announced in the budget are welcome to help create more business certainty across the built environment," said Mr Fitzpatrick.
"The Construction Industry Federation welcomes this and will continue to work with Government on its commitment to addressing constraints to NDP delivery in areas such as planning, public sector capacity, digital adoption, housing delivery, and skills. This ensures that the construction sector has grounds for increased positivity in 2024," he added.
