CIF Annual Report 2009

2009 has witnessed construction’s perfect economic storm. All sectors have seen a dramatic fall off in activity and in the value of the activity, and that fall continues.

Major problems face the economy, but specifically our own industry has key issues to be addressed.

For the contracting sector, significant cuts to the Capital Programme and the failure of Government to meet its own reduced spending targets are impacting severely. As outlined in the CIF’s Mid Year Review, up to 100,000 jobs are at risk as a result of the failure to start new public construction projects.

The consequences for the industry and for the wider economy are grave.

There is no economic logic for the policies currently being pursued by Government. As the Construction Industry Council (CIC) report earlier this year to Government shows, it actually costs more to do nothing than do something. Every €1bn that Government cuts from the Capital Programme costs the Exchequer €510m in increased social welfare payments and lost taxes and spending. Conversely, the net cost to Government of spending €1bn on construction projects is €490m, and the economy gets the benefit of the new infrastructure, whether it’s a new road, school or hospital.

The residential and property markets remain extremely subdued as a consequence of continuing job losses, economic uncertainty and very tight lending conditions. The prospects for recovery are closely linked to whether Government policy can get credit flowing again. The proper working of the National Asset Management Agency (NAMA) is vital for the economy, but importantly to bring stability to our development sector.

The CIF’s detailed pre-Budget Submission has called for measures to stimulate the economy and to support the construction industry in sustaining and creating, employment. Every representative group will be making their case, but no other sector has the ability of the construction industry to immediately turn investment into jobs. The CIF, through its Branches and Associations, has been making its case strongly to the political system, whilst nationally we have had an ongoing engagement with Government and the Department of Finance.

The Government’s Public Capital Programme is a focal point of the CIF’s submission. By utilising the funding options set down by the CIC the Government can bridge the gap between committed direct Exchequer spending and the original targets set down in the National Development Plan, 2007 to 2013, and by doing so safeguard over 70,000 construction jobs and help jump-start activity and confidence elsewhere in the economy.

From the Government’s announcement in April’s Supplementary Budget, the CIF has had extensive engagement with NAMA and with the political system on NAMA. Our engagement has focused on the importance of a functioning property sector for the Irish economy and the need for NAMA to work with the industry in achieving its key objectives. Ultimately, NAMA will be judged by the degree to which it gets credit flowing again to consumers, house buyers and businesses, including construction employers. Irrespective of any other perceived achievement, if NAMA fails on this front it will have failed.

The CIF has also identified measures to stabilise the residential and commercial property markets and generate substantial receipts for the Exchequer. There is little doubt that that property markets are overshooting on the downside and that this is exerting a major drag on the economy.

The build up to this year’s Budget has been characterised by talk of cuts, with particular emphasis on the McCarthy Report and the Government’s commitment in April to achieve a further €4bn in savings, but unless these are balanced with measures to create jobs, the Irish economy is likely to miss out on the first wave of global recovery that has already taken hold in France, Germany and elsewhere.

During the course of the year, the CIF also instigated a significant advocacy campaign around the need to reform pre-qualification criteria for smaller building and civil engineering projects. The need for change is self-evident when contractors that built local schools and other local public infrastructure cannot pre-qualify to add extensions to these buildings.

The Alliance of Specialist Contractors Association (ASCA) organisation is examining the issues of payment within the supply chain, with a view to devising an agreed policy.

Globally, there are signs of an economic pick up which will benefit the Irish economy through increased demand for Irish exports but domestically there remains a massive job of work to be done. The CIF will continue to play its part in advocating a policy position centred on increased Government investment in badly needed infrastructure and around other measures to restore investor confidence and sustain jobs.