The construction industry has grounds for increased positivity in 2025 as the domestic economy continues to expand.
While growth in the Irish domestic economy has been robust, infrastructure deficits are becoming more and more evident in areas such as housing, water and energy infrastructure.
The Department of Finance growth forecasts are consistent with the economy remaining at full capacity in the near-term.
Overall construction investment in Ireland is forecast to increase by over 3.9 per cent in 2024 and 5.7 per cent in 2025, according to EY/Euroconstruct.
At a minimum, Irish society needs the construction industry to deliver 60,000 housing units annually. Ireland’s capital cities and regional communities require Irish construction companies to deliver billions of investments in critical infrastructure under the National Development Plan to drive future economic growth.
Over the last decade, the population has increased by almost 14 per cent.
An increase in population leads to a higher demand for public capital investment in infrastructure and services irrespective of the pace of economic growth.
The most recently completed quarterly construction outlook survey finds that there was a year-on-year increase in revenue from new orders across general contracting, home building and specialist contracting, but a decrease was evident in the civil engineering sector.
A total of 35 per cent of companies expect a revenue uplift from new orders in Q4 2024, except for civil engineering.
The cost of labour and raw materials continues to put upward pressure on pricing across all sub sectors, with 66 per cent of survey respondents experiencing a year-on-year increase in the cost of labour and 62 per cent report a year-on-year increase in the cost of raw materials.
The increase in project pricing appears likely to continue into Q4, albeit at a reduced rate.
Employment levels remain positive year-on-year across all sectors and all company sizes except those with a turnover less than €300,000.
Employment levels are expected to grow across all companies in Q4, most notably those with turnover of over €9million. A total of 43 per cent of companies across all sectors expect the cost of labour to continue to increase in Q4.
Sectoral employment in construction increased by four per cent year-on-year to 176,300 compared to the same quarter in 2023 where total sectoral employment stood at 169,400.
With the uncertainty surrounding current global events and economic headwinds that may dampen the growth of the economy in the medium term there is a pressing need to create a more stable policy and investment environment across the built environment.
Unprecedented demographic growth and an ageing population will mean that Ireland’s demand for investment in critical infrastructure will reach beyond the existing capital ceilings, especially in water services, housing, health and transport.
So, what will 2025 bring in terms of new capital investment?
Capital investment will increase by €1.6billion over the 2024 allocation. This will bring total capital investment in 2025 to €14.9billion and will provide funding for key investments across sectors including health, housing, education and transport while also investing in Ireland’s climate goals.
Additional capital expenditure of €750million is being made available for 2025 from windfall corporation tax receipts.
This additional funding has been allocated to critical infrastructure projects that are at an advanced stage, as well as to the existing Climate Action Fund.
A further €1.25billion will be made available in 2026 with the aim of boosting effective delivery of capital projects in this area.
Budget 2025 introduced €750million to facilitate an initial, direct equity injection to support capital spending on the further development of the electricity grid infrastructure; a further allocation of €1.25billion to the Land Development Agency (LDA) and €1billion to Irish Water for non-domestic capital investment.
The CIF welcomed the increased investment but cautions that clear timelines, sightlines and commitment to delivery must follow.
At the time of writing, National Accounts figures just released (December 5, 2024) show that the construction industry’s contribution to GDP increased by 3.5 per cent to over €3billion in Q3 2024.
Overall activity expanded by 4.5 per cent compared with the same quarter of 2023. However, year-on-year contractions were recorded in the first nine months of 2024 in the construction sector (-1.5 per cent).
On the expenditure side, capital investment decreased by 3.4 per cent compared to the same quarter of 2023. Investment rose by 211.9 per cent or €18.6billion compared with the previous quarter.
However, it must be noted that capital formation in Q2 2024 was lower compared with recent trends due to a significant export of intellectual property (IP) arising in that quarter.
To ensure Ireland’s future economic competitiveness, Ireland needs a plan-led approach to infrastructure to ensure critical utilities, such as water, electricity and transport are built to support future population and labour market growth.
According to the ESRI, Ireland also needs to see significant and consistent rates of investment in the domestic economy as we contend with looming demographic changes in the decades ahead.
The CIF looks forward to working with the new government in 2025 to address ongoing constraints to NDP delivery in critical areas such as infrastructure and housing delivery.
The CIF will contribute across all policy platforms to ensure investment momentum continues to assist with the backlog in planning applications and restructuring of An Bord Pleanála to An Coimisiún Pleanála, public sector procurement capacity, digital and OSM adoption across the supply chain and access to skilled labour.
