Delays in Capital spending and jobs: BC(A)R SI.9 of 2014

by bregs blog admin team

adding-job-groups-to-delayed-jobs-255x212

In a recent statement the CIF suggested the construction industry was set to grow to €11 billion and create 10,000 jobs in 2014:

http://cif.ie/news-events/current-news/construction-industry-to-grow-to-€11-billion-and-create-10000-jobs-in-2014/

Quote in Italics:

“We are expecting to see a strong increase in construction activity during the course of the coming year,” said CIF Director General Tom Parlon.  “For the first time in 7 years there are a lot of reasons for the construction sector to have a positive outlook for the upcoming year…You can see a wide variety of reasons why we expect the industry to grow on a macro level in the next 12 months.  The sector turned the corner in 2013 and all the expectation is we will see further growth during the year.  Given the number of factors in play that will generate activity during the coming year we predict that the sector will grow by approximately €1 billion on a national level.  This will bring the overall value of the sector to an estimated €11 billion.  

“We’ve seen already how a small increase in construction activity can create a lot of employment so we believe that an additional 10,000 jobs will be generated in the sector over 2014.  For example in 2013 there was a 1.9% increase in activity between Q2 and Q3 2013 according to the CSO’s ‘Production in Building and Construction Index’.  That coincided with a jump in employment of 2,700 jobs.  We would expect the level of activity increases to at least match those levels at a quarter on quarter basis during 2014.  

“There are also a number of other reasons for the surge in confidence that has been experienced in the industry.  The Construction Contracts Act will take effect from the spring which will boost the flow of payments around the industry.  The new building regulations will come into effect on 1st March 2014.  The new register of Irish construction companies will be launched in March.  Government has begun undertaking a review of the Government form of construction contracts, while a review of public procurement also likely.  All these various measures will all help the construction sector. 

“When you also take into account the Government’s commitment to bring forward more measures to boost the sector, we think 2014 will be a very positive year for our industry,” Mr. Parlon concluded.  

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Comment:

This is a welcome and long overdue positive outlook for the construction industry. However the premature introduction of SI.9 may cause delays in capital spending. Currently due to be come into effect on 1st March this regulation has been introduced against the backdrop of calls by numerous stakeholders for deferral on the grounds that the industry is simply not ready. The RIAI, the representative body for Architects and a key stakeholder in the formation of SI.9, has repeatedly called for deferral of the legislation recently in a letters to ministers. Delays due to implementation issues could cause a major hiatus not only in government capital projects but across the board in the construction sector. This may have consequent impacts on foreign direct investment,  job creation and the  fragile recovery mentioned above by the CIF.

5 years of acute recession combined with tighter lending practices has resulted in pressure across the industry from reduced overdraft facilities and diminishing turnover. We know of delays already happening due to appointment issues for design teams and the new certifier roles. It’s only a matter of time before these translate into delays in tenders for projects and commencement on site.

The capital budget for 2014 is €3.2bn. Out of this if €1bn is for qualifying works to come under the remit of SI.9 (i.e, non infrastructure etc) , 6 weeks delay could cost the construction industry €125m. The real possibility of delays due to SI.9 is something that should be of great concern to the CIF and it’s members, along with other industry stakeholders. In this respect the recent RIAI letter to Minister Bruton should be carefully considered.

Link to RIAI letter of 29th January 2014 requesting deferral to Minister Bruton:

RIAI_PRESIDENT_LETTER_TO_MINISTER_BRUTON

Link to RIAI letter of 15th january 2014 requesting deferral to Minister Hogan:

Letter_from_RIAI_President_to_Minister_Hogan_15Jan2014

Legal advice form Matheson Solicitors:

131213LetterfromMatheson2.154138

Legal Advice from Dennis McDonald SC:

131206 Letter from Denis McDonald 4 Dec 2013

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