Building Industry Close To Rock Bottom...

This is the latest news in our construction industry that really took place in this global economics constraint.

Irish Construction Industry is going down to the lowest point in history.


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Building industry close to rock bottom, says CIF
19 October 2009 updated & edited by:Saudi

The Irish construction industry is close enough to ‘‘the lowest point in its history’’, and the current challenge is to emerge from this recession ‘‘with a viable industry remaining’’, according to Andy O’Gorman, president of the Construction Industry Federation (CIF).

Over the past two years, some 200,000 jobs have been lost in the construction industry and total output is expected to drop to €10 billion this year, from a high of €36 billion two years ago.

O’Gorman accepted that this output peak was never sustainable, and said that output of €18 billion was needed to maintain the current 180,000 jobs.

He said that his members were facing serious problems with late payment, as well as non-payment for contractors, sub-contractors and suppliers who are involved in construction projects. Currently, contractors or sub-contractors carry out a month’s work, have these accounts certified and are paid at the end of the following month.

However, the average delay is now two to four weeks and, in ‘‘exceptional cases, four or five months, where a client may have lost access to the bank funding’’. ‘‘That’s whether they’re public or private contractors, and we see that as a challenge to the integrity of the industry," said O’Gorman, who added that the CIF had set up a subcommittee to examine the issue.

Reformed government contracts are also proving a headache for some contractors, as the ‘risk’ (of extra costs for any reason) is transferred to the contractors, who must include this cost when a bid for tender is being submitted.

‘‘These are particularly problematic at the moment, as the risks are not being priced for - they are being ignored," said O’Gorman.

‘‘For example, if there were an archaeological find on the site that delayed it for six months, you have the ability to price for this. But, by including this, you may lose the tender as you are bidding against eight or ten other contractors," he said.

Contractors were also bidding ‘‘at or below cost’’, and many were not charging for machine or plant hire, cutting their margins as much as possible, he said. Wages for labour could not be reduced because of registered employment agreements, but there was a ‘‘major squeeze on because things have got so competitive’’.

O’Gorman said that banks were also putting a squeeze on the flow of capital in the industry. Acquiring finance for jobs was ‘‘near-impossible’’, he said.

‘‘Working capital is extremely difficult to come by. The banks are just so risk-averse, and I think every contractor has seen curtailment of his overdraft facilities," he said.

O’Gorman, who is also the co-owner of IIF mechanical and electrical contractors in Cork, has seen his own business suffer. Two years ago, the company had 150 employees, but that has halved to 75.Commercial work was ‘‘very scarce’’, there were ‘‘less and less tenders’’ and while ‘‘government work is there’’, it was ‘‘not moving in any great quantity’’, he said.

While the CIF initially welcomed the establishment of the National Asset Management Agency (Nama), its concerns have grown since the legislation for the state body was published. One concern was whether Nama would have sufficient funds for developers with performing loans who wanted to continue with their work.

‘‘Everything belonging to a developer goes into Nama, and it doesn’t have funds to allow him to continue developing.

He can’t go back to a bank because all his assets are in Nama, so he may not get the capital he needs," said O’Gorman.

‘‘We can understand that there will be different approaches to different projects by Nama. Some may be long fingered for a number of years because they should not be developed now, but whether they will have the ability to provide the capital then, as the only lending body, we’re not quite so sure."

He said that a CIF sub-committee had been set up to address its members’ concerns about Nama.

Another issue O’Gorman wanted to see urgently addressed was the release of funds - and go-ahead for infrastructure projects - under the National Development Plan (NDP).

He said that the government had committed €6 billion of funding to this, but the CIF could only trace between e0.5 and €1.5 billion of this being awarded this year.

‘‘That is only a fraction of the promised spending," he said. ‘‘You can’t just award a contract overnight. It takes time to prepare a project and get off the ground. Though there are many shovel-ready projects, such as the schools programme, the Department of Finance seems to be holding back on these."

Last February, the CIF presented a plan to the government, advocating that private pension funds could be used to invest in infrastructure in the short term, but it had received no reply. ‘‘This spending is needed," said O’Gorman. ‘‘It will keep people in work - and prices for completion have never been cheaper. We don’t want to lose another 100,000 workers in this industry - and see trained professional emigrate with their skills - but we are dismayed at the pace of progress in this area.

‘‘Every other country has used a stimulus package to boost the economy whereas, here, the NDP package seems to be dramatically cut."