Construction industry to remain feeble in 2013

THE construction industry will remain very feeble throughout 2013 at least but there are some prospects for recovery in the medium term, according to Tom Parlon, director general of the Construction Industry Federation (CIF), who addressed some of its members in Ennis on Tuesday.

 

Speaking to The Clare Champion, the former Progressive Democrats TD said the next 12 months won’t see any significant improvement.

“I don’t think anyone is predicting it in the next year anyhow. I’ll be five years in the CIF on November 1 and the Ulster Bank activity survey has shown a decrease in activity month-on-month over the full five years and property prices started going down in August 2007.

“All the indications in terms of the way the economy is going, the pressure that is going to be on as a result of the budget this year, the uncertainty at European level and generally the lack of confidence out there, there’s going to be no pick-up in construction next year.”

According to his figures. work began on just 152 houses in Clare in the first eight months of this year, which is down by 34 on the equivalent figure for 2011.

He said credit is not available and that isn’t likely to change in the immediate future. “The banks, in effect, are not working. They’re not giving out any money. They’re not giving mortgages no matter how cast-iron a case a couple might have in terms of their job security and their income and so on. It’s almost impossible to get a mortgage for a new home. I don’t see that changing in the next six or 12 months either.”

Ireland is paying a big price for its property boom, with thousands of former construction workers on the dole, while taxpayers have seen their standards of living eroded to pay for delinquent banks.

Having served as Minister for State at the Department of Finance from 2002 to 2007, Parlon was at the highest level of Government during a time when the boom reached its zenith and was at work in a department that took no meaningful action to head off a shuddering recession.

He acknowledged that he had no idea of the knife-edge the country was on. “I was in Government from 2002 to 2007 and I had no appreciation of the collapse that was coming. The Central Bank are the people who I would have expected to give that sort of signal and they weren’t saying it. The few economists that did come out and say it were sort of made pariahs and deemed to be of the wall. But there were very few of the mainstream economists and those associated with national press, very few of them rowed in and said this would happen.”

He feels people in all sectors of society are responsible for the housing boom and subsequent crash, with developers and the construction sector no more responsible than anyone else.

“There was a mania about property, there’s no question about it. Everyone wanted to own a house or two or three, whether you were a civil servant or a guard or a farmer or whatever. People just felt property was the place to put your money and I suppose anyone that invested in property from 1998 to 2006 or 2007 saw it multiply. If you invested in property you were worth a fortune and if you got out in 2006 you were lucky but if you didn’t, it’s now back to late ’90s prices. There was a mania about it. It did begin to show a great return and Irish people seemed to have a major attraction to it. You could blame the builders on one hand but builders only built because they thought people were going to buy them and a lot of people did buy them.”

The downturn in construction is almost unique in European terms with the loss of 178,000 jobs and he offered some figures on the scale of the downturn in the industry.

“When it was at the peak in 2006, I think it was worth about €36 billion and it was about 23% of the total economy, which was just way too big and was unsustainable at that level. We didn’t fully appreciate it at the time but it was unsustainable and way ahead of any European average.

“Now we’re down to about 5% and next year we expect it’ll be worth about 8bn, which is less than a quarter of what it was. So you can imagine the impact that has on all of the people involved, whether employees or people in business and clearly it has an impact on the Exchequer as well. The construction industry was paying a massive amount of tax, through PAYE and development contributions and all the rest of it. When we built 90,000 houses, we contributed €9bn that year to the Exchequer.”

There has been a huge human cost to the collapse. “Sometimes people associate the CIF with the big developers but most of them weren’t even members of the CIF. Our bread and butter members are the house builders and the civil engineers and the general contractors around the country. They’ve suffered extremely badly. Rates have gone down, there’s been an awful loss of wealth within the industry and about 170,000 jobs have been lost.”

The industry has shrunk drastically, now less than half the size it would be at under normal circumstances and he feels that when the wider economy stabilises, the sector will catch up.

“When the economy is flying everyone will want to build and do extensions to their house, invest in property and do whatever. When the economy is on the downslide, people don’t want to do that at all. Common sense would suggest that upgrading and improving the energy efficiency of houses is a good investment, which gives you an easier lifestyle and you need to spend less money on fuel but people aren’t even doing that now.

“We have a very young population. I think last year the CSO said we had the highest birth rate ever. There’s still a growing population and a lot of people now are choosing to rent property, which wasn’t the tradition. We are going to get back to the norm, there’s no question about that. We still need lots more infrastructure, more schools, more universities and so on,” he concluded.