Joe McCaffrey – managing director of Dublin-based construction consultants Duke McCaffrey – believes firms in the Republic are facing a formidable challenge as a consequence of Covid-induced hyper inflation, which has seen the price of galvanised steel-related products soar by 42 per cent over the course of the last eight months.
“Like many other sectors, construction was hit hard by enforced closures during the pandemic but the worst may be yet to come in terms of the financial impact,” he said. “Ireland sits on the periphery of world economies and there is a very real worry that we may find ourselves last in supply chains due to our relatively small size and as a consequence of bigger states snapping up and hoarding raw materials in a bid to preserve their own prosperity post-Covid.
“Any hopes that Ireland – as home to two of the world’s largest material suppliers in CRH and Kingspan – would be immune to such supply and demand issues have proved unfounded.”
Joe cited further planned price increases, which are due to come into effect on 1st July, as evidence of the squeeze being exerted on current and planned construction projects.
“Come next month, the cost of wall panelling will have risen by 22 per cent since last November and steel by 57 per cent – there are very few businesses that can simply absorb such dramatic levels of inflation,” he continued.
“Project management and quantity surveying companies such as ourselves are seeing first-hand the impact on our clients and their contribution to building Ireland’s housing stock, infrastructure and education facilities.
“There is genuine concern behind the media headlines about an inevitable jump in the cost of new homes; people are putting projects on hold and, in a small number of cases, aborting them.
“There is certainly no shortage of fingers crossed that the price rises will pass once the world readjusts to life with coronavirus but material and labour costs aren’t hot air balloons – they don’t automatically come down without a very deliberate correction.”
Duke McCaffrey’s current main efforts are assisting its clients in navigating commercial agreements on an open-book basis to help share the risks and burden associated with increasing costs and developing value proposals to better optimise building works.
A longer-term, bigger picture solution is, however, required to return Ireland’s construction industry to firmer foundations, according to Joe.
“Nobody wants to see the Republic take a huge step backwards in respect of the recent progress made to enhance infrastructure across the country, so a means to stop the pinch on construction has to be found,” he concluded. “Sustaining the current fiscal pain is one thing but left unchecked these prices will lead to major cutbacks in the quantity of projects proceeding and the quality of those completed.”