Tuesday 17 July 2018

Ireland's top building contractors warn about persistent low margins

There have been fears of a knock-on effect for the sector in Ireland after the collapse of UK contractor Carillion. (Stock image)
There have been fears of a knock-on effect for the sector in Ireland after the collapse of UK contractor Carillion. (Stock image)
Gavin McLoughlin

Gavin McLoughlin

Ireland's top building contractors have warned about persistent low margins even as turnover at the top 50 players has increased.

The Construction Industry Federation's (CIF) annual ranking of its top 50 contractors says cumulative turnover hit €6.72bn in 2017, a rise of €720m on the year before.

But CIF director-general Tom Parlon warned that the Government procurement process is putting pressure on margins.

There have been fears of a knock-on effect for the sector in Ireland after the collapse of UK contractor Carillion.

The collapse caused a delay in a school-building project here, which itself meant that Sammon Contracting Ireland went into liquidation.

Mr Parlon said there is too much emphasis on getting the lowest price and this is leading to a downward spiral in terms of margin and quality of work.

He said this means that if anything unforeseen occurs, a firm risks finding itself in examinership and liquidation.

"It's very competitive. We're just coming out of a period where we had very low activity and there was extreme competition among contractors," he explained.

Mr Parlon said the industry had "emerged from the depths of the recession leaner, more modern, sustainable, adaptable and resilient".

But he said significant improvements still need to be made. "We must enable more companies to grow and become world leaders. To do this, we need the Government to set out an export-led growth strategy for this important sector. We also need to fix our procurement system here at home and ensure the right supports are in place to help build companies of scale," Mr Parlon said.

The sector has been boosted by increasing activity in the commercial property and housing sectors, but is now warning about difficulty in attracting skilled labour.

Mr Parlon said there needed to be a more streamlined process for people looking to move home to Ireland from abroad and find work in the sector.

Just over €5bn of the turnover seen by the top 50 CIF members related to activity in Ireland, with the rest exports.

Sisk topped the charts for the CIF member company with the highest turnover, coming in at €950m.

Mercury Engineering was second at €600m with BAM Civil at €470m.

Minister of State for Public Procurement Patrick O'Donovan said the Government was "committed to working with the industry" to try to manage margin and skills challenges.

"If not addressed, the capacity for the industry to grow is limited," he said.

"Skills shortages allied with the uncertain global trade situation are likely to increase inflationary pressure in the short to medium term," Mr O'Donovan added.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business