Season 2, EP 1: SINEAD LEW
Construction Market Outlook 2023
Sinead Lew is a Corporate Tax Director at PWC.
Sinead, with her colleagues in PwC and The Society of Chartered Surveyors Ireland (SCSI), were involved in the creation of the recently published Construction Market Monitor Report 2023.
The report tracks responses from various construction and land surveying professionals such as chartered building, quantity, project management, and planning & development surveyors.
The report covers several activity trends related to general construction activity and projects, as well as those trends experienced within surveying firms which provides a useful and valuable insight regarding the current and expected delivery of construction activity and output for the next 12 months.
The report is informed by professionals working in the public and private sector, both from large and smaller firms across Ireland.
But how will this affect general building contractors?
To shine some light on that very question, Sinead & Ciaran dig into some of the key questions that general building contractors will need to know and understand through the next 12 months.
Q: How are the inflationary pressures being managed?
Through the work that I’m doing with my clients, I’m seeing some who are managing to re-negotiate and share some of the inflationary pressures with clients; I’m seeing others who are just having to bear it themselves because they’re in fixed contracts with clients, and clients aren’t willing to budge.
Anecdotally, what I’m hearing as well from some of the private sector stuff, is that Commercial might be slightly easier in terms of sharing some of the inflationary pressures, because they feel ultimately that commercial sector rents may be able to take some of the increases more so than residential sector rents.
This is because of the broader affordability constraints that are on all of us out there who are trying to buy a house and are subject to Central Bank rules; 3.5x lending rules and deposit requirements don’t afford you the same affordability to be able to take on an increase to the cost per unit.
Q: What impact has COVID HAD on labour and materials shortages?
Interestingly, if you look at the numbers now, there’s actually more employed in construction now than there was just before Covid. So we’re up to just shy of 160,000 people employed in construction in Ireland at the minute. Pre-Covid it was 148,500.
But anyone on the ground knows that the shortages are more acute than ever. I think the impact of Covid is that we went in to Covid with acute skill shortages, and all that Covid did was that there’s more pent-up demand coming out of Covid now, which has just further exacerbated the labour issues that were there.
Also, during the period where we had site closures, we also closed Solas Training Centres, so apprenticeships were paused, and we’re still getting through that lag. Especially in areas we really need, like wet trades, engineers and surveyors.
The outlook looks very positive. The government has committed to 10,000 new apprenticeships by 2025, and hopefully that comes to pass.
Q: What impact has COVID had on the adoption of technology in construction?
Ciaran: JLL have a report from 2020 that said that, due to the pandemic, construction technology had been accelerated – 3 years into 9 months – because the market was forced to wake up. What impact has Covid had, in your opinion, on the adoption of construction technology.
Sinead: It’s been a massive catalyst. It’s catapulted the industry into having to do something. The construction industry has traditionally been seen as lagging behind other sectors in adoption of technology.
But Covid, through site closures, health and safety measures around social distancing, has forced new ways of working and new ways of thinking.
As a result of that, hopefully in due course, we’ll start to reap the efficiency and productivity gains that the industry has needed and have been called for for a long time.
What I think is really important here is that the private sector has stepped up and invested in construction technology. But any kind of culture of innovation that’s being harvested can only be sustained if the public sector and public procurement equally invests in the same approach as the private sector. Otherwise we run the risk of those gains falling by the wayside.
Q: What are the challenges adopting new technology in construction?
The Irish market is about 47,000 SMEs, and then you have some bigger players in the market as well. So that fragmented nature of our the market is a key challenge.
If you’re adopting a new technology, the way it’s positioned at the minute is that it’s a large cost and time outlay, and that’s a challenge for the smaller players in the market. It’s a challenge in terms of having the personnel to do it, and it’s a challenge in terms of having to pass on some of their investment cost to their end consumer, who are very price-sensitive on the smaller, maybe residential or retro-fitting projects.
There’s only a limited scope to pass on price increases, so that’s quite a challenge.
If you look at our most recent Construction Market Monitor, it’s over 50% of those that said that their firm had invested in technology and digitisation were from firms with head counts with over 50, and the majority were from firms with over 100.
So it’s a challenge in terms of up-skilling existing employees, or seeking out and employing people with the right technology skills. That will have to be a focus of upcoming apprenticeships and college courses. They will have to focus on construction technology. There’s a disconnect there now and that will have to be challenged.