Construction output in Ireland to suffer worst decline in EU

Industry has been harder hit during pandemic than the height of the recession

'Housing completions for 2021 are projected to be 23,000.' Stock image: Chris Ratcliffe/Bloomberg

Sean Pollock Email

June 21 2020 02:30 AM

Construction output in Ireland is expected to suffer a contraction that would surpass any single-year decline during the financial crisis, according to figures from industry forecaster Euroconstruct.

New figures show output in the sector is expected to fall by 37.7pc this year. According to stockbroker Davy, this would be worse than the most significant fall during the financial crisis of 33.6pc in 2009. Expectations regarding the fall are the worst in Europe, though reflect the UK figures, where a fall in output of 33.4pc is expected.

Annette Hughes, a director at EY-DKM Economic Advisory, which compiled the figures for Ireland and is a member of Euroconstruct, said the drop in output is expected due to the shutdown of construction sites after the onset of the Covid-19 pandemic here. She believes on-site health guidelines may also affect productivity.

"The Covid-19 global pandemic stopped the construction sector in its tracks on March 28," she said. "There is no clear visibility as to how the Covid-19 pandemic will materialise over the coming months or as to its duration."

Hughes said she hopes the industry recovers stronger than expected as events transpire over the coming months.

Hughes, who said forecasting output was difficult as the sector waits to see how the new regulations bed in, added other downside risks.

These include the possibility of a second wave jeopardising public capital investment and potential additional housing supply constraints adding to affordability issues. She warned more firms might cease operations, leading to workers becoming unemployed.

Hughes said there could be delays in the supply chain, with an estimated 28pc of inputs coming from imports.

EY-DKM's preliminary assessment shows that there could be a rebound in construction output of 17.6pc in 2021, and 7.6pc the following year. Hughes said, due to the pandemic, the volume of construction output for 2022 is forecast at just below 80pc of the corresponding amount in 2019.

She said the level of new house building could fall by 95pc in the second quarter of the year, 40pc in the third and 20pc in the fourth, relative to the corresponding levels last year. This would mean around 14,000 units would be built in 2020, down from the 21,138 units completed in 2019 and below the 25,000 target contained in the Government's 'Rebuilding Ireland' strategy. Housing completions for 2021 are projected to be 23,000.