Construction activity is set to increase slightly in 2005, but building materials firms remain concerned about rising energy and labour costs, according to a new survey.

The Building Materials Federation found that 86 per cent of building firms expected to either increase their output or keep it at the same level as 2004.

The Federation said there was a strong performance in 2004 by the construction sector which was underpinned by intense house-building activity. Similar patterns were likely in 2005, it said. "Demand is strengthening in the construction sector, particularly for the first half of 2005," said Mr Paul Kelly, director of the Federation.

The Federation said employment levels would not change much, with only 14 per cent forecasting an increase. Forecasted levels of capital expenditure were slightly more positive, with 42 per cent of respondents expecting an increased spend.

The firms surveyed, mainly buildings materials companies, said there were several threats to competitiveness in their sector.Some 78 per cent cited energy costs as a major threat, while labour costs remained a concern.

Some 42 per cent of respondents also said a failure to implement building regulations was also a major problem. As suppliers to building firms, the companies also cited delays in implementing the National Development Plan as a key issue for them.