Strong residential pipeline maintaining confidence in construction

A strong residential pipeline is maintaining market confidence in the construction sector for the Republic of Ireland, despite margin pressures and uncertainty over Brexit, according to global professional services business Turner & Townsend.

The consultancy’s Republic of Ireland Market Intelligence Report points to competitive conditions for contractors, with a steady supply of tender opportunities maintaining strong order forecasts.  Figures from surveyed firms show that 70 per cent of companies’ order books are full for 2019, only falling slightly for 2020/21 period at 63.5 per cent.

The residential sector has become the top performing growth area for 60 per cent of firms, an increase of 22.5 per cent on the previous six months. Based on the current activity in the sector, including build to rent residential schemes in the planning stages, Turner & Townsend anticipates continued growth in the residential market for the coming six to 12 months.

Mark Kelly, Managing Director for the Republic of Ireland at Turner & Townsend said: “Confidence among Irish contractors couldn’t be more different than those of their UK counterparts. With full order books and high levels of activity, the short to medium term outlook is healthy for the construction supply chain and with further growth on the horizon too.”

“This is not to say that the industry isn’t without its challenges. In particular, tight margins and the rising cost of materials and labour continue to put pressure on contractors. The industry needs to keep a wary eye on how Brexit could impact the movement of key resources in the coming months.”

The report draws a stark comparison with sentiment in the UK, with Turner & Townsend’s most recent UK Market Intelligence report recording a third successive quarterly fall in confidence in Q2 – its lowest level recorded by the quarterly index.

There is room for caution in Ireland however, with rising costs in materials and labour maintaining pressure on contractors. Margins across the sector remain static at 3.9 per cent while firms expect average tender price inflation to reach 6.1 per cent in 2019 – effectively leading to a cut in profits unless savings can be found elsewhere.