CIF: Construction industry shutdown is unnecessary and has huge economic consequences

An independent economic report has laid bare the impact of the partial lockdown of construction on the industry, its employees, clients, and the wider economy. The CIF presented the report to the Government to demonstrate the shutdown’s negative impacts are unnecessary as HSE evidence shows construction does not impact on Covid-19 spread.

CIF, Director General, Tom Parlon, said:

“HSE monitoring of construction has shown minimal cases since September. This is because the industry can operate at full capacity without contributing to the spread of Covid-19. This report shows every week of this unnecessary shutdown; costs 800 homes, €427m in lost output, €156m per week in lost profit and wages, €32m in lost Exchequer revenues and almost 2,800 fewer persons employed. In addition, 60,000 construction, instead of contributing to the economy safely, are costing the Exchequer €21m in PUP weekly.

Ireland is the only country to shut down its construction industry and this is having an number of unintended consequences that again are hugely detrimental and totally unnecessary. On a weekly basis, I hear from members about the impact of the lockdown on the mental health of our workers. Thousands of workers are now considering leaving Ireland in search of work in any other jurisdiction. This will have significant impact on the medium-term capacity to deliver essential housing and infrastructure for both private and public sectors.
In addition, the cost to Ireland Inc in terms of international investment is also immeasurable. This shutdown impacts primarily on private sector related construction whilst most public sector projects continue. This targeting and ongoing uncertainty about reopening on the 5th April is impacting on investment decisions.

Finally, in the middle of the State’s worst housing crisis, the industry is precluded from building homes with potentially 10,000 homes taking out of supply. This could extend the housing crisis for another three years as the housing sector struggles to overcome existing systemic barriers to producing the required 35,000 house output annual considered optimal.
What is most frustrating is that the industry has proven construction sites can be kept Covid-19 free due to national and CIF safety protocols. Concerns about mobility are totally unfounded as cases on sites have never surpassed 56 whether there are 80,000 or 40,000 construction workers on site regardless of the variant of Covid-19 we face. We’re calling on the Government to end this unnecessary lockdown and allow our industry to contribute to economic recovery and ending the housing crisis because it is safe to do so.”

Recent data from Construction Information Services, the CIF’s research partner, found approximately 50% of projects over €1million are operational currently suggesting about 40,000 workers on site. There are 39 cases associated with construction indicating just how safe construction sites have been made, rendering any lockdown unnecessary. The economic impact report, commissioned by the CIF, and carried out by EY lays bare the impact of the shutdown on construction companies affected by the lockdown. It found that:

• The level of new housing commencements declined by 23.5% in the first nine months of 2020 to 17,615 on the same period in 2019. This will have serious repercussions for the supply pipeline in 2021 and 2022.
• A 13-week lockdown will see the level of housing supply significantly undershoot the pre-Covid-19 projection for 2021 of 28,000 units. Following the Covid-19 impact in 2020, the IHBA had revised their projection for 2021 to 24,000 completions even before the current 2021 lockdown.
• With construction sites closed for 19 weeks in total, business performance has been severely dented with many firms facing challenges around their cash flow, working capital requirements and retaining their highly skilled staff.
• Contractors could also face tighter margins upon the reopening of the sector, because of the changing market conditions plus additional costs, which will see businesses forced to close.
• The ability of contractors to reach tender thresholds for future public sector work may be limited due to reduced income over the lockdown. This could significantly impact the industry’s capacity to deliver critical public sector projects within the NDP.
• Similarly, the opportunity to bid for work overseas may be impacted by the lockdown in Ireland. The top 50 contractors in the industry had a combined Republic of Ireland turnover of €6.7bn in construction activity in 2019. Assuming their turnover mirrors the sector’s decline; €490m in 2020 and €759m in 2021 would be wiped off industry’s turnover. These firms exported €3.3bn in construction expertise, a figure which is also likely to be lower due to the challenges with operating in a partial national lockdown.
• Many of the smaller firms in the sector – 96.5% of construction firms (55,616) employ less than 10 persons – may work in the renovation sector and on smaller home extensions, which are not deemed essential and as such as disproportionately impacted by the partial lockdown.
• Construction firms not deemed to be undertaking essential projects are incurring their normal head office overheads/non-site-based costs as their staff work from home and this poses significant cashflows challenges.
• The availability of adequate skilled resources in the industry has been a challenge for some time in advance of Covid-19. There are an estimated 50,000 qualified skilled crafts persons and an estimated 46,000 self-employed persons in the construction industry. With all European construction industries fully opened, there is a risk that workers may opt to emigrate to where work is available rather than remain on PUP payments. This is a factor which could derail the construction recovery when the lockdown is eased.