96% of construction companies report increase in cost of materials

6% of construction companies have reported a rise in the cost of building materials between June and August 2022, with 85% expecting cost rises to continue to year end, according to the latest Construction Industry Federation Economic Outlook research. This comes as the Government plans to impose a 10% levy on concrete products.

86% reported an increase in the cost of labour over the last three months, with 61% expecting labour costs to continue to increase.

The increasing cost of materials was cited as the top concern for companies over the next three to six months (86%), followed by access to skilled labour and cost of labour (both 72%), securing a healthy profit margin (69%) and the cost of fuel (67%).

Just 12% of companies believe that the Government’s inflationary measures introduced between January and May 2022 have been effective. CIF believes the primary reasons for this are a lack of engagement and awareness from contracting authorities. 88% hold the view that the increased cost of building new homes will have a negative impact on housing supply in 2023.

Despite the challenging trade environment, the industry remains resilient, with a significant number of companies expecting to increase their turnover and staff.

76% of construction companies reported that their turnover has stayed the same or increased over the last three months, with over one third reporting an increase (35%). 82% of companies surveyed reported that staffing levels had increased or stayed the same, with this trend expected to continue for the remainder of the year.

Director General of the Construction Industry Federation, Tom Parlon, said: “Cost increases are having a significant impact on the construction industry, with rises in the cost of materials, labour and energy.

“The Government’s budget announcement of a 10% levy on concrete products is out of step with the needs of public consumers and construction companies at a time when extraordinary inflationary factors are driving costs up across society.

“We understand the issue the Government is seeking to address around the faulty product that was supplied into the construction sector, but we are concerned that this measure will result in additional costs for first-time buyers, people trying to extend their homes, affordable and social houses and public infrastructure projects, as it will drive costs up along the supply chain.

“Current indicators from our research are that the outlook is stable for construction companies this year, which have weathered the impact of Brexit, Covid shutdowns and supply chain disruption. But there are challenges ahead, particularly for housing targets, which now include the impact of the new levy.

“To support the industry to continue to deliver on critical housing and infrastructure for the Irish people, the Government should continue to invest counter cyclically and put in place measures to effectively manage inflation in the sector as we look towards 2023.”

The Construction Industry Federation’s Economic Outlook Survey was carried out by Accuracy Research with 202 CIF members between 2nd – 9th September 2022.

The federation’s annual conference will take place in Croke Park tomorrow, 6th October 2022, with 500 delegates from across the sector expected to attend. Simon Harris, Minister for Further and Higher Education, Research, Innovation and Science, and Michael McGrath, Minister for Public Expenditure and Reform, will address the audience.