Corporate Member Blog: “Activity in the Commercial and Residential development sectors has increased significantly over the past 18 months.”

Brendan Crowley of AIB Finance & Leasing outlines the current financial landscape faced by the Construction Sector.

AIB provide a comprehensive range of services to personal, business and corporate customers in our target markets and have leading market shares in banking products in the Republic of Ireland. AIB’s business has been restructured in recent years with the aim of becoming a customer focused, profitable and lower risk institution, well positioned to support economic recovery in Ireland while seeking to generate sustainable shareholder returns.

At AIB we know the construction industry plays an integral role in stimulating and sustaining the economy and we have an important part to play in all aspects of Commercial and Residential development.

The level of activity in the Commercial and Residential development sectors has increased significantly over the past 18 months. Commercial development has to date been dominated by Dublin office development but there are positive signs that this is beginning to spread to other large urban areas. There has been a substantial increase in residential development activity witnessed over the last year and indicators are for more growth in this sector.

In addition to supporting the industry with Project Finance, our Asset Finance arm, AIB Finance & Leasing is a key finance provider in the construction plant & machinery sector and has been for over 40 years. In keeping with AIB’s overall strategy, AIB Finance & Leasing promotes a community and relationship-based approach with over 45 mobile Sales Representatives supporting Irish businesses.

There has been a noted increase in demand for finance of construction equipment in the last 12 months to update and replace assets. Companies maintained and refurbished existing assets during the downturn instead of replacing and buying new, and the inevitable impact was that repairs and maintenance costs for these older assets increased, impacting cashflow and having a negative effect on machine downtime.

We recognise, as with any sector, the industry faces some challenges. These include, availability of investment, potential skills shortage, Brexit, sensitivity of contractors to economic cycles, revenue fluctuations and competition for a growing but as yet limited number of projects which serves to drive down margin.

Notwithstanding these challenges, the outlook for the sector is positive and AIB looks forward to working with customers and key industry stakeholders including the Construction Industry Federation to support the industry in 2017 and beyond.

Brendan Crowley is the Head of Asset Based Lending (Area Dublin & Corporate Banking) at AIB.