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Builders say they can’t lock in price of contracts over expected rise in inflation

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The rising cost of raw materials has potentially worrying implications for private-sector and public housing. Photo: Jason Alden

The rising cost of raw materials has potentially worrying implications for private-sector and public housing. Photo: Jason Alden

The rising cost of raw materials has potentially worrying implications for private-sector and public housing. Photo: Jason Alden

Nine out of 10 of builders say they are no longer prepared to commit to fixed-price contracts as a result of the expected surge in inflation – a move with major implications for private and State sector tendering.

Higher or open build costs will put pressure on house prices – where builders already say margins are tight – as well as for major public procurement schemes including, potentially, the long-­delayed National Maternity Hospital.

In April, Health Minister Stephen Donnelly conceded that the cost of the National Children’s Hospital, which is currently under construction, had risen to €1.73bn compared to a €1.4bn capital budget approved for the scheme in 2018.

Eighty-five per cent of builders expect projects to be priced higher over the coming three months, according to the Construction Outlook Survey by the Construction Industry Federation (CIF).

The key challenges are the increased cost of raw materials (88pc), access to skilled labour (72pc) and fuel costs (68pc).

Builders are also now seeking a “fair price variation” clause to be added to public- sector contracts that would allow them to recoup higher costs regardless of contracted prices.

Higher building costs reflect the higher price of raw materials, such as steel, as a result of supply-chain disruptions including the war in Ukraine, according to builders surveyed.

The director general of the CIF, Tom Parlon, said higher costs are going to impact on the pipeline of construction activity, particularly when it comes to public tendering.

“No one could be expected to commit to a definite price for projects which could take years when costs are rising on a daily basis.

“It is practically impossible to estimate where costs are going to go based on the levels of inflation we have seen in the industry over the last 18 months and especially since the turn of the year.” he said.

Even so, any change to state contracts that could be seen to fail to protect taxpayers’ financial interests are likely to be controversial for the Government, which is under pressure to deliver already announced plans for new or expanded hospitals, schools and housing. Rising building costs have potentially worrying implications for private-sector and public housing.

House price data for March had offered some slim good news on prices, showing the monthly pace of increase had dropped to 0.6pc, a significant slowdown versus the pace over recent months.

However, renewed pressure on costs could drive up new- home asking prices and the cost of public housing or even dissuade developers from pushing ahead with schemes out of fear margins will be eaten up by higher input prices that the market cannot absorb.

Despite pressure on raw- material costs and uncertainty about future profitability, the survey shows the construction sector is expanding.

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Four out of 10 construction companies’ turnover increased in the last three months.

A third of building firms intended to hire over the next three months. The survey was carried out by Accuracy Market Research between April 11 and 19 with 342 CIF member companies participating.


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