The government must plan for the recovery

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Major building projects could take up to two years to get up and running after the Covid crisis unless the Government learns lessons from the last financial crash, the Society of Chartered Surveyors Ireland (SCSI) has warned.

“It’s inevitable coronavirus will have a significant and immediate impact on the construction sector,” said SCSI vice-president Micheál Mahon, adding that the situation was evolving so quickly that the scale of the slowdown is difficult to predict.

“That fact alone is causing huge uncertainty in the market. We can already see investment is slowing and some decisions are already being delayed in the commercial, hotel and residential sectors,” he said.

Mr Mahon said it was critical that Government take on board the harsh lessons learned from previous crises, especially the financial crash of 2008.

“The current housing shortage, our infrastructure deficit, particularly in health, and widespread skills shortages can all be traced back to the failure to plan for the economic recovery in the post-crash scenario,” Mr Mahon said. “That cannot be allowed to happen again.”

He called on the Government to show it had not forgotten the need to plan for a recovery even as it copes with the demands of the current crisis.

“While work has been suspended on non-essential sites as part of measures to contain the spread of coronavirus, we believe it is vital that finance and planning for State projects which are being progressed at the moment should continue as much as possible in the current circumstances,” he said. “Issues in housing, health and infrastructure will still be with us when we come out the other side of this crisis.

“If projects are shelved it could take 18 to 24 months to get teams back working and up to current levels.”

 

Labour shortage

The SCSI is wary of the impact on the sector of a labour shortage as workers head home to be closer to family.

A shortage of labour and required skills had been the main cost drivers for rising building costs in recent years, he said, as the industry rebuilds from the exodus of skilled labour after the financial crash.

“We’ve been struggling with a skills gap ever since,” Mr Mahon said. “Labour shortages have put upward pressure on construction inflation and given the huge demand in the sector for construction services, prices have continued to rise.”

Figures published by the SCSI on Monday show that while average construction costs continued to rise in the second half of last year, the rate of increase was slowing.

According to the SCSI’s index of tender prices, the national average inflation rate increased by 2.8 per cent in the second half of 2019, down from 3.4 per cent in the first half of the year, bringing the annual growth rate to 6.2 per cent. That is down from 7.1 per cent in 2018.

The SCSI normally forecasts prices over the next six months on the back of the survey but has not done so this time, given the uncertain longer-term impact of the Covid crisis.

 

This article was first seen at https://www.irishtimes.com/business/construction/major-building-projects-could-be-delayed-two-years-after-covid-crisis-1.4221408

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