Building industry set to shrink in 2010

THE VALUE of the Republic’s building industry could shrink to just €14 billion by next year, just over one-third of its 2007 peak, according to the latest prediction.

The Society of Chartered Surveyor’s tender price study, which will be released today, shows that the building slump has driven construction contract costs to levels last seen seven years ago, after falling by 11 per cent in 2008.

Commenting on the results yesterday, society president, Seán McCormack, said the research confirms what the industry has been hearing anecdotally for some time.

“Some tenders received during 2008, particularly in the later months, showed decreases well in excess of the average decrease for the year, so further falls are assured,” he said.

Mr McCormack said the figures reflected the dramatic fall off in all sectors of the building industry, including residential, commercial, public sector and civil engineering, and the fact that its output is likely to fall to less than half its 2007 peak of €38 billion.

The industry employed over 280,000 workers when it hit its peak in late 2006. This has since fallen by up to 30 per cent, according to some estimates.

“The fall in tender prices reflects the situation where contractors are bidding at or below cost in order to secure a share of the ever diminishing market,” Mr McCormack said.

“Now is the time for the Government to forge ahead with the national development plan and other capital projects as there is real value to be had in the market,” he argued.

Last week, business lobby group, Ibec, said the Government should cut back on the national development plan in favour of creating a fund for troubled businesses.

The Society of Chartered Surveyors’ tender price index survey shows that the amounts quoted by builders seeking contract work fell by 11 per cent last year.

The index for the second half of 2008 shows a decrease of 7.4 per cent for the second half of the year and a fall of 11 per cent for the year as a whole. The decrease has brought tender prices into line with what the industry was charging in the second half of 2000.

The society’s survey dates back to a benchmark year of 1998, at which tender prices were valued at 100. In 2007, they hit a record high of 150, but have since declined rapidly to the 130 mark, which they reached in 2000.The sharp decline in house building since 2007, and a subsequent slowdown in commercial projects, meant the Republic’s building industry was one of the worst performers in Europe last year.