Ireland's green light

Ireland, a country that has a small, modern and trade-dependent economy, is the UK's fourth largest export market and the only major world market where the UK is the dominant supplier.

The country joined the Euro on January 2002 along with 11 other EU nations and since then it has been hailed as one of the fastest growing economies in the developed world. The historical economic figures indicated that the Irish economy had performed remarkably well since the mid 1990s with a growth rate of up to 10% per annum. In 2005 the GDP growth rate was 4.7% with a forecast for continued high growth level over the next two years. Irish inflation remains at a relatively low level in 2005, around 2.4%. But inflation has been steadily rising since the start of 2006 driven by rising mortgages, significantly heftier fuel and petrol costs as well as the underlying drag of government stealth taxes. In May, the annual headline rate stood at 3.9% and we are expecting it to keep increasing to 4.5% by end of year.

Housing boom

Housing looks set to remain the key driver of the Irish construction industry for the next few years

The Irish construction industry employs over 250,000 workers, which is 13% of the total workforce. The industry has shown significant growth over a decade. In 2005, the industry recorded an output of almost €30bn (£20.64bn) representing around 18% of GDP. The prospects for 2006 remain optimistic with the expected volume of new construction work to grow by over 1% in 2006.

Housing is the main sector of the industry which underpins the growth of the Irish construction industry and its employment. In 2005 housing accounted for around 64% of total construction output, representing over €19bn worth of Irish construction works. Some 81,000 new homes were built in 2005 reaching a new record level, a level which is forecast to be achieved again during this year. This sector looks set to remain the key driver of the Irish construction industry for the next few years.

Infrastructure work shared 18% of total construction output amounting to €5.2bn worth of construction work in 2005. Transport 21, the government's €34.4bn transport investment plan, is the major investment in infrastructure over the next 10 years. The main projects include the M50 upgrade, the new M3 motorway between Clonee and Kells and also the upgrading of the urban railway systems around Dublin including the new Luas lines, the proposed new metro and rail links to Dublin Airport. Transport 21 plan will have a positive effect on this sector, which has a busy year ahead in terms of recruitment and workload.

Dublin enjoyed the highest output growth sharing 27.7% of total construction output in Ireland

Non-residential construction, which includes offices, shops, hotels, hospital and schools, accounted for only 18% of total construction output, representing €5.4bn of building works in 2005. With ongoing investment in primary and secondary schools buildings, which will total over €600m this year, the forecast for this sector looks bright. Having experienced a relatively poor performance during the start of the new millennium, the future for the Irish construction industry remains positive for the foreseeable future.

In terms of regional construction output, 2005 reported another year of strong construction growth throughout, although firm figures for 2005 are not as yet available. The latest available data for the sectoral breakdown, within the regions, indicated that the residential sector continues to dominate output across all the regions. Dublin enjoyed the highest output growth sharing 27.7% of total construction output in Ireland.

Construction cost and prices inflation

Data from the Society of Chartered Surveyors shows that construction costs rose by an annual 3.5% during the first quarter 2006. The SCS' figure suggests that tender prices remain competitive with an increase of 5.4% between the first half of 2004 and the first half of 2005. The Irish construction industry has seen a rapid increase in the amount of non nationals in the workforce, and this has impacted by helping to keep construction inflation down. The graph on the far right compares the tender level between Ireland and the UK. There is no projected tender price data available from SCS, however we predict that tender prices will, on average, rise by 5-6% during this year.