Testing the Construction 2020 vision


The government’s new strategy for the building industry, Construction 2020, which aims to create 66,000 jobs in the sector over the next six years has been broadly welcomed by the industry, with the warning that action, rather than talk, is what is urgently needed to cut unemployment in the sector. 

At present, there are more than 100,000 former construction workers on the Live Register, despite the fact that the building industry has been in recovery for over a year. In the strategy there is a stimulus package which provides for new building projects worth up to €200 million, including a €50 million allocation for regional and local road projects and a further €50 million for social housing provision.

Construction Industry Federation’s president Philip Crampton says the 75 actions detailed in the strategy have the potential to provide ‘a considerable boost’ to construction activity and create thousands of new jobs, but actions need to be prioritised.

Crampton said: “We are glad to see that the Government is taking a detailed interest in the construction sector in Ireland.  This is the first time all the various constraints and issues that are currently hampering construction sector activity have been set out by the Government.  Now that they have been acknowledged the next step is to deliver policies and actions that will ensure these problems are overcome.

“The CIF looks forward to working with the Government to help bring forward these policies and developing the finer details behind the various initiatives highlighted in the Construction 2020 strategy document.  With the construction sector finally returning to growth after six years of decline, we need to ensure that this momentum is fostered.  So it is vitally important that the actions outlined in this strategy document are moved forward as quickly as possible.  They also need to be fleshed out to take into account the realities of the current construction market.

“Potentially this strategy could provide a major boost to the industry.  If all these action points are implemented in the right way then we should see a considerably increase in construction activity around the country and that would create thousands of construction jobs.  Boosting the construction sector will also help the broader Irish economy.”

Housing Need

It’s not just about job creation. There are thousands of families and individuals desperate for an affordable home. A recent Housing Agency report on housing supply requirements suggests that an average of 15,932 new housing units a year are needed over the next five years. The agency estimates that 47% of total supply over the period is required across  the Dublin Region. The report also notes that 57% of all households in the Dublin region over this period will be for one and two persons, while a further 18% will be for three person households. This has consequences for the type of housing supply that the country needs.

It is in this area that the Society of Chartered Surveyors Ireland was most critical. SCSI vice-president Andrew Nugent said, “The Government’s strategy for a renewed sector is very welcome. The ‘kick start’ initiative for prime development areas, which will  include flexibility around densities as well as streamlining the planning and appeals process, will address barriers to development identified by the SCSI.

“However the lack of direct measures, to improve the supply of housing, particularly in Dublin where price inflation is increasing at worrying levels is a shortcoming of the strategy. The Housing Agency has reported that we need up to 80,000 units over the next five years. We built just 8,401 last year and, given the fact that it can take between 18 and 24 months for a new scheme to be built, we would like to have seen measures to fast track the delivery of that supply to meet demand”

Overall, the main criticism of Construction 2020 is that it is full of maybes and possiblies. with over a dozen of the key points involving setting up reviews, frameworks, working groups and new engagements with bodies such as NAMA, the European Investment Bank and the European Investment Fund.  NUI Maynooth Professor of Geography Rob Kitchen said:  “A lot of what the document sets out is a roadmap for finding solutions rather than providing solutions. At one level this is good – we need well thought out solutions. At another level it isn’t so great because we should have done the strategising a few years ago and now we’re trying to play catch-up whilst various forms of crises continue to play out around us – mortgage arrears, social housing waiting lists, rising prices, weak supply in some areas, oversupply in others, etc.

“There are proposals for lots of task forces and reviews, some tinkering with existing legislation but no radical overhaul, but not a lot of new concrete, strongly cash-backed initiatives – schemes mentioned in the strategy are all relative small sums of money or restate existing public capital expenditure plans, which are a fraction of pre-crash levels.”

Energy Efficiency

However, there is one area outlined in the strategy that offers new opportunities for firms and that is in the area of improving energy efficiency.  In particular, Section 5 of the strategy looks at energy performance contracting (EPC) where a client pays for improvements to the energy efficiency of a building out of the savings it accrues from those efficiencies.

Under the EPC model, energy efficiency improvement work work is done by energy services companies (ESCOs), such as Electric Ireland, but it can be done by specialist contractors.   The ESCO will guarantee a minimum level of savings to the client and is obliged to reimburse the client for any shortfall.   All savings achieved by the ESCO above the guaranteed level are retained by it to cover its costs, expenses and profit up to a point known as the shared savings threshold – above this threshold of savings, the client and the ESCO share any savings achieved in a pre-agreed ratio.

Given that the client is only paying the ESCO from the savings achieved, this is a very attractive model to public sector bodies that are unable to borrow. Indeed, on the ESCO side, there is now an abundance of finance for EPC projects being made available through national energy efficiency funds and various European instruments, as well as the European Investment Bank.

In Ireland, the Energy Efficiency Fund of €70 million was formally launched on 8 May and AIB has also launched a €100 million fund for energy efficiency.

In a recent presentation to Engineers Ireland, Hugh Cummins of Phillip Lee Solicitors said: “There is money available and this is a once-in-a-lifetime opportunity not to be missed. Ireland is in an excellent position to become a world leader in the field of EPC and energy efficiency retrofitting. Now is the time for contractors and consultants to up-skill and create partnerships and joint ventures to provide the bundles of energy efficiency measures, which will be sought by the public sector in order to achieve its mandatory energy efficiency targets.”

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