Mr. Tom Parlon:

I thank the Chairman. I am delighted to have the opportunity to address the members of the Committee on Budgetary Oversight. I am just thinking that the attacks normally do not come from this side of the table; from my experience, it is the other side of the table that might choose to have a go sometimes.

I am the director general of the Construction Industry Federation. Mr. Dominic Doheny, its president, is here with me.

I want to give a little background information on the Construction Industry Federation. We represent the entire construction industry. That includes contractors that build infrastructure, commercial and industrial development, housebuilders building everything from one-off housing to developments with 1,000 units and, very important recently, specialist contractors, particularly mechanical and electrical contractors, who build the industrial buildings that attract the likes of Google, Facebook, BMS, the big farmers and so on.

There are approximately 40,000 enterprises working in the construction industry. The bulk of these are considered to be SMEs with fewer than ten employees. Overall, there are about 140,000 people working in the industry, and every month for the past four years nearly an extra 1,000 have been added. This is a big record and indicative of very clear growth. It is a Central Statistics Office figure. Simply put, the economy and society are dependent on the industry for construction but also for employment and opportunity in every community in Ireland. Mr. Martin Shanahan, CEO of IDA Ireland, stated recently that every sector in the economy depends on construction for its ability to do business and its competitiveness. When construction works, Ireland works. The more competitively this industry can deliver construction, the more competitive the economy is generally.

On a positive note, data show that on an annual basis the volume of output in building and construction increased by 20.6% in the first quarter of 2018 compared with the fourth quarter of 2017. Output volumes increased by 30%, 10.1%, and 8.1%, respectively, in residential building, civil engineering and non-residential building work. There was an increase of 18.1% in the value of production in the same period. The value of construction reached approximately €20 billion in 2017, which is just 7% of GDP. On the front page of The Irish Timestoday, in line with the fact that the National Ploughing Championships are being held in Offaly, the Central Bank states agricultural output has surged to €8 billion. The figure for construction is two and a half times that. It is widely agreed that Ireland requires the industry to account for about 12% of GDP for sustainable economic and social development.

Members will note from our budget submission that we did not have a major shopping list and that we are focusing on the alignment of State bodies and regulatory agencies behind construction rather than on taxation policy measures. Essentially, we believe the majority of key policies have been put in place at national level by successive Governments. What is needed now is better alignment of the State's agents and resources with industry to deliver housing, infrastructure and, important, the workers the industry now requires. The focus is correctly on resolving the housing crisis in the near term. We outline a number of suggested actions derived from the experience of our members on the front line of housing delivery. Our budget submission, however, focuses on two other areas that we are warning must be addressed if the housing crisis is to be solved. Without adequate delivery of infrastructure, residential development will stall, and nationally the thousands of homes we produce will not form the vibrant, dynamic communities that we need.

Second, our budget submission sounds a clear warning that the industry is now facing a wider skills shortage that we must address. For example, a 2018 survey carried out with DIT found that 81% of federation members hired tradespeople but that only 14% of these companies believed there was a sufficient number of skilled tradespeople in the market.

A report we produced in 2016 stated we would require an additional 110,000 workers to deliver on the Government's Rebuilding Ireland strategy and the national development plan. Since that time, the ambition of these strategies has increased while there has been no co-ordinated policy intervention to increase the number of qualified workers - including graduates and apprentices and those in the trade, craft and professional or technological areas - being produced by the education and training system.

To overcome the skills gap in the immediate term, the industry will source foreign labour to meet demand. In the medium term, it is imperative that our own education and training system produce more suitable graduates to ensure we retain the talent, experience and the intellectual property produced in the construction industry over the next decade.

Construction has always had a major impact on employment. As output in the industry increases so does the number employed. Direct construction employment now stands at 137,300 people, just in the first quarter of 2018, and that was an extra 3,900 people since the last quarter of 2017. This translates into almost 6.2% of the total Irish workforce. From 2007 to 2013, the construction industry lost approximately 160,000 jobs, which represented almost 65% of all construction jobs according to the CSO. That loss was the more severe in construction than in any other sector. It is, therefore, in the interest of the wider economy for the Government to work with the industry to attract more skilled workers into construction, particularly from within the education system and the Diaspora. In our budget submission, we call for a number of initiatives that are required to increase the number of apprentices coming into the industry and also to increase investment in traineeships. Delaying action now may mean skills shortages in the near future at a time when demand for construction will be at its highest – this will see increasing wages, rising business costs and a loss of value for money for the Exchequer.

The three issues in our budget submission, housing, infrastructure and skills, all impact on our industry’s ability to build the housing and infrastructure our economy and society require to sustain our recovery. If we work together, we can deliver 35,000 houses per year and the €116 billion infrastructure plan while rebuilding the construction industry and, for the first time in decades, putting it on a stable and sustainable footing for the future. The timely implementation of the national planning framework, NPF, and the National Development Plan 2018-2027, NDP, is paramount, especially in areas such as transport, housing, health and education. Failure to deliver will damage competitiveness of the wider Irish economy with resultant negative impacts on employment, gross domestic product, GDP, growth and exports. We have engaged with State agencies and Government bodies over the past few months to improve the efficiency of delivery of construction activity. Local authorities, An Bord Pleanála, the Office of Government Procurement and SOLAS have all given us a clear message that these bodies are not adequately resourced or motivated to facilitate the delivery of housing, infrastructure and skilled workers.

Important processes controlled by the State that impact on the delivery of construction, such as planning, waste, utilities connections and procurement, are delaying delivery of essential construction. In this budget submission, we are also calling on the Government to increase ambitiously investment in research into construction products and services. Increased innovation is a key step towards improved productivity in the industry. Every euro invested in research into efficiency and productivity in construction will provide good returns to every other sector in the economy. This will improve the competitiveness of the economy and benefit all other sectors. I will quickly go through some areas. In regard to people, the apprenticeship model requires fixing in a number of key subsectors, particularly the wet trades - mainly plasterers, block layers and tilers. A recent survey carried out with the Dublin Institute of Technology, DIT, found that 71% of CIF members do not hire apprentices anymore as they are unable to afford the cost. To repurpose the model, we are suggesting that employers’ PRSI contributions be zero rated for those engaging apprentices in trades in need of stimulus. In addition, SOLAS should introduce apprenticeship trainee grants for a limited time until the shortage of construction apprenticeships has been addressed and payments of apprenticeship fees in phases 4 and 6 should be reintroduced, as part of the apprentice’s training, from the significant national training fund budget that the industry contributes to annually. This measure was removed in 2014. I understand from a recent meeting in the Department of Education and Skills that the national training fund has an excess of close to €400 million at the moment that cannot be accessed.