Thursday 3 May 2012

Post ‘Celtic Tiger’ Ireland. Ireland’s construction industry awaits the recovery.

(Originally written for university marking in November 2011)
11/11/2011
Post ‘Celtic Tiger’ Ireland.
Ireland’s construction industry awaits the recovery.
By Michael Muldowney, Dublin.

With peak economic growth rates at an unprecedented level of 11% Ireland was once hailed as the ‘Celtic Tiger’ of economies. But when the global economic downturn impacted in 2008 businesses folded, jobs were lost over night and despite major efforts to repair the shattered economy, three years later Ireland is nowhere close to recovery.


The Republic of Ireland’s sovereign debt crisis became so critical that at one point the country was considered the highest risk of sovereign default in the Eurozone. Extensive measures were implemented to address the crisis but nothing could halt Ireland’s slide. As a result, in November 2011 the Government of Prime Minister Brian Cowen, deciding that all other measures were exhausted called in the International Monetary Fund and the European Central Bank to ‘bail out’ Ireland to the cost of around €113bn. As part of the payment deal Ireland was inclined to implement a four year austerity action plan which consisted of massive spending reductions, higher taxes, and a lower minimum wage. These measures proved so universally unpopular with the Irish that Cowan’s Fianna Fáil party, which had held a majority since 1987 was routed in the following election.

During Ireland’s economic accent it’s construction industry was one of the primary sectors of industry driving the country forward as it strived to build world class infrastructure.  Heavy funding and subsidising of programmes nationwide were approved in an attempt to showcase Irish ingenuity, especially in the capital city Dublin which benefited from substantial funding in an attempt to build a cosmopolitan metropolis to rival other European cities.

The €752 million Dublin port tunnel was completed in 2006, major expansion of Dublin’s international airport and the building of over a thousand kilometres of motorways were among some of the high intensity projects undertaken.  Many of these infrastructure projects are still incomplete and this week the government was forced to cancel several high profile programmes. The Dublin North metro line, the long awaited Dublin underground network, Western corridor rail link, a new high security prison and the Limerick to Cork motorway are among the programmes that have all been cancelled. However plans to construct a national children’s hospital will be continued, albeit using national lottery grants.

Industry officials look to the future.

The Irish construction industry already badly mauled by the recession now faces further damage with the cancellation of these large projects.  “Both private and public construction investment is severely impacted by the economic and financial crisis here” says Martin Whelan, the director of communication for the Irish Construction Industry Federation (CIF) “The cutbacks in public capital investment have significant implications for the indigenous construction industry. Since the downturn commenced, over 180,000 direct construction jobs have been lost and there is now concern for an additional 25,000 jobs in the sector in 2011 because of the reductions in investment. The construction industry is, in consequence, losing essential productive capacity”

With the loss of such a high number of jobs the future outlook of the industry is bleak. When the global economic downturn eventually ends Ireland will be in a weakened position and unable to call on the skilled workforce it once boasted to re-start projects in the future, which is something Martin Whelan is acutely aware of. “The Irish economy will recover and will require a construction industry, which, although less than half of the peak, will amount to 12-13% of Irish GDP and would represent a very significant sector of the economy… one of the legacies of the past 15 years was the creation of a world-class construction capacity in Ireland, capable of delivering major infrastructure programmes. The ability to deliver this infrastructure did not happen by accident – it was the result of sustained investment in people, plant and systems in response to the growth needs of the Irish economy.

With further cuts to investment and jobs, can Ireland sustain its construction workforce and still hope to emerge with an industry capable of delivering? The CIF Director continues, “Construction activity this year is forecast to be 7% of economic activity and to fall to 5% in 2012.  This is leading to the erosion of essential skills and capacity and undermining the entire fabric of the sector here… It will not be easy to rebuild these skills.  Not only is Ireland losing skilled workers to other economies, it is also losing the skilled workers of tomorrow because apprentices and young professionals are not coming through the educational system


The Irish government has decided that the country cannot build it’s way out of recession and instead hopes that the multinational sector, which according to a spokeswoman for the Department for Jobs, Innovation and Industry is “in a very healthy state,” can be the foundation for the country’s recovery. The official went on to comment that, “The multinational sector in accounts for 75% of all exports. We have a 14% competitive advantage over three years ago, and while salaries are 8-9% down it works out as a 14% overall gain because in Europe costs have risen.”


Workers sit tight, awaiting a recovery.


West of Dublin, in Country Kildare are thousands of either unfinished or completed but as yet unsold houses which are known as ‘Ghost estates.’ On the finished estates only 20% of the houses are inhabited.
 I met Matthew Bracken, a 20 year veteran of the construction industry who has become one of the casualties of the downturn.

“It’s not like it just snuck up on us, we knew the boom had to end at some point, but I expected a lull of maybe 3 or 4 years, nothing quite this catastrophic” Matthew tells me. Like many Irish construction workers he earned high wages during the boom period and then entered the housing market, buying and budgeting on expectation of the good earning they were making.

“At the height of the boom” he continues, “even the apprentice workers on site were taking home perhaps €2000 per month minimum, so that gives you some indication of the kind of money involved in the industry. We were building on every piece of land available but as you can see, most of these houses are uninhabited and essentially worthless.”

I ask Matthew what he plans to do with no end to the depression in sight. “I’m going to have to stick it out and sit tight, eventually it has to get better.”

ENDS

Many thanks to Mr Martin Whelan of the CIF for his input on this article.



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