Report by Ulster Bank shows activity in December dropped 15% from previous month

Irish construction activity fell to a seven-year low, as the figure dropped by 15% last month compared with November 2007.

A report from Ulster Bank revealed that especially civil engineering activity contributed to the steep decline. The index in the sector fell from 53.5 to 45.4 in December 2007.

New order numbers and employment rate over the whole construction industry also fell to record lows.

The Irish bank reports a steady decline in construction new orders over the past nine months. Especially housebuilders were hit by a deterioration in demand for new housing.

Employment figures have also been on a steady decline since May 2007, forcing construction firms to lay off staff as projects were finished.

Construction firms are overall pessimistic with 36% of companies expecting activity rates to be lower at the end of 2008.

Pat McArdle, chief economist at Ulster Bank, commented: “Commercial activity has been teetering for some time but is now recording a significant decline. This has happened sooner than expected given that a good number of high-profile projects have yet to complete. The fall in civil activity is surprising as the National Development Plan was maintained and, indeed, accorded priority status in the recent budget.

“The outlook remains poor as orders are also at a record low and so is employment. It appears that projects finished are not being replaced and developers are reacting accordingly. As a result, confidence has now turned clearly negative though it is still above the 2001 and 2003 lows. It remains the case that the more drastic the curtailment of housing activity, the sooner the existing backlog will be cleared allowing activity to resume.”