Nuanced approach needed to keep essential construction work going

Once the Government decided that reducing the movement of people was the priority in tackling the pandemic, it was inevitable that the construction sector was going to be asked to down tools to play its part. While the industry was disappointed in having to lock down, it responded positively, as it has from the start of this crisis.

The industry's disappointment was reflected by Government Ministers and officials. Minister for Finance Paschal Donohoe stated last week before the Cabinet sub-committee: "Keeping construction open will be a very important part of how we can help our economy recover as we move through the year."

Successive Ministers and the Taoiseach over the past week have publicly and privately lauded the industry for its approach to Covid-19.

The Government had hoped to keep construction operating uninterrupted throughout 2021 because it is a huge employer, it delivers essential housing and infrastructure, and it generates nearly 10 per cent of national GDP at a time when most of the economy is in an induced coma.

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Construction companies will have spent the weekend confirming with their clients if their projects qualify as essential under the Government’s criteria. It is impossible to assess what the impact will be on the industry at this time, but it will be significant. Only essential health, education and FDI projects will continue under the strictest safety protocols.

It is a testament to these workers that by adapting to social distancing and other safety protocols they kept Covid-19 largely out of sites

Most of the industry will now spend the next three weeks refining its procedures, and preparing staff and sites for a safe return to work to ensure the excellent record of the industry in relation to Covid-19 is maintained.

In the previous wave, these procedures kept the incidence of Covid down to a minuscule fraction of the total workforce. Based on the HSE’s monitoring, at no point were there more than 56 cases in the industry. This was largely because more than 200,000 people completed the industry’s online induction programme in advance of the return to work in May 2020.

We estimate there are circa 80,000 onsite construction workers. It is a testament to these workers that by adapting to social distancing and other safety protocols they kept Covid-19 largely out of sites. Our hope is that the numbers of Covid-19 in the community start to come down rapidly so our workers can again build the homes, offices, hospitals, schools and roads this society requires.

Full capacity

The Government is no doubt eager to have construction open because, at full capacity, the industry will return about €2 for every €1 invested, employ about 200,000 directly and indirectly and, most importantly from a Government point of view, generate €680 million in wages and profits that circulate around the economy.

This week, tens of thousands of construction workers will have to access the pandemic payment. For the past nine months these workers have been contributing to Ireland’s economy at a time when most other sectors have been on life-support. Lockdown in construction is a major negative swing for the exchequer; if 100,000 of our employees are now on PUP, that costs the taxpayer an additional €35 million a week.

The impact of this lockdown is difficult to assess now. Looking back to 2020, it appears that the lockdown during April and May resulted in 5,000 fewer homes being delivered last year. Most worrying was the 45 per cent drop in commencements in quarter two last year that will have knock-on effects in completions in early 2021.

Overall, the best estimates are the last lockdown took about 10 per cent of total construction output, amounting to about €3 billion of total GDP. As the country faces further economic deficits this year and starts from a negative position on housing supply, every week in lockdown has an amplified negative impact on end-of-year supply.

In 2020, the homebuilding industry pulled out all the stops to achieve 20,000 homes output after last year’s lockdown. This is still well off the 35,000 deemed essential by commentators to house our growing population. To achieve anything approaching a sustainable level of housing output in 2021, the political system will have to deliver the range of budget measures announced last year promptly.

Accelerated

These measures, such as the shared equity scheme, need to be accelerated to give the homebuilding sector, the banks and the consumer the confidence to build, lend and purchase homes respectively.

It's worth noting that no other country (barring some US states and Italy) shut down their construction industry even during lockdown

As I have said, the Government has taken a nuanced approach to this lockdown, allowing construction to continue in very limited circumstances. Construction will continue of school projects, hospitals, water infrastructure and some social housing deemed essential by Government under the strictest adherence to the Construction Industry Federation’s standard operating procedure. However, safety will be the paramount concern for construction companies.

Additionally, Ireland is a significant hub of pharmaceutical, data, technology and global supply chains, many of which are critical to the world's efforts to tackle Covid-19. Limited construction-related activity in these areas will keep the lights on for these critical industries. Currently, construction companies will be redoubling their focus on preparing sites, employees and management to minimise incidence on sites.

It's worth noting that no other country (barring some US states and Italy) shut down their construction industry even during lockdown. Most recently, the UK and Scotland entered lockdown and left construction open. So we are hopeful that our own industry can open relatively quickly. From an international investment and FDI perspective, it is an important signal that Ireland can continue to build what is required safely despite Covid.

Over the coming three weeks the industry and the Government will continue to the monitor the situation on essential sites. The industry will use the lockdown period to refine procedures so it can return to work at the earliest date deemed safe by the Government and start to contribute to our recovery again.

Tom Parlon is director general of the Construction Industry Federation