Construction consultants Linesight are forecasting average construction cost inflation for this year of 1.75-2.25 pc.
Whilst we had been seeing a levelling off from rates of 7-8 pc in recent years, much of that reduction is a result of the pandemic creating capacity in the industry and contractors reducing overheads.
To find out more about the sector, I chatted with Richard Joyce managing director Europe, Stephen Ashe director, and Fiona D’arcy group chief marketing officer.
Last year saw record turnover for Linesight, Mr Joyce told me and the firm now employs approximately 750 staff across 22 locations worldwide.
He attributes that result to the success of a three year plan to target the life sciences, data centre and private rented sector (P.R.S.) sectors, supplementing a strong position in the general commercial areas.
The firm has weathered the pandemic well, he told me, rapidly adapting to remote working and with productivity increasing in many areas. Staff were redeployed in some locations and a challenge has been the mentoring of junior staff.
Ms D’arcy told me that they had invested in a range of wellness initiatives such as a half-day for everyone on Fridays and that the challenge was almost to stop people working too much. Interestingly, Mr Joyce told me that the mood among the staff, worldwide, was a keen desire to get back to working from the office.
This reflects a global “turning of the wheel” from the start of the pandemic where “remote working” was the future, which became a likely “hybrid model,” and now Google are leading the way in calling staff to return to the office.
Whilst the value of construction output in Ireland in 2020 at €24.7bn was understandably down from €26.6bn the previous year, with Linesight forecasting a further reduction to €21.6bn this year, Mr Ashe pointed out that it is “activity” that has been muted and not “demand” and that there is pent-up funding and demand for property.
The cost of raw materials is contributing to those increasing costs, with steel, insulation materials and timber rising most.
It’s no coincidence that most of the steel used in Ireland is imported from the UK and with most of our timber and insulating materials crossing the UK landbridge,
Brexit has added to costs, delays, certification issues and paperwork. Many designers are now specifying components that will be sourced and delivered from outside the UK. Indeed, Mr Ashe pointed out that the effects of Brexit on the industry have not been fully tested yet, as the sector shut down early in the Brexit era.
Mr Joyce is exercised about the mass closing of construction sites and points out that Ireland was the only country in the EU to do this.
The pandemic has affected the ability of Linesight staff to travel between projects and Brexit has added to that challenge. For example, Mr Joyce tells me that it now takes three months for a UK national to get a visa to work in Spain.
Looking ahead, he told me that there will be growth in logistics development, bolstered by the shift to online retailing, and adding to the boom in the data centre and life sciences areas.
A new focus for Linesight is renewable energy and they are working worldwide with a partner developing storage and distribution outlets for hydrogen as a fuel for vehicles.