New figures show construction price inflation has slowed dramatically due to Covid-19

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New figures show construction price inflation has slowed dramatically due to Covid-19

The latest Tender Price Index published by the Society of Chartered Surveyors Ireland shows that construction price inflation slowed dramatically in the first half of this year due to Covid-19

According to the SCSI’s index – which is the only independent assessment of commercial construction tender prices in Ireland – the national average inflation rate increased by just 0.9% in the first half of 2020, down from 2.8% in the second half of last year. This brought the national annual rate of inflation down to 3.8%.

While the rate of inflation was fairly uniform across Dublin, Munster and Connacht/Ulster at 0.9-0.8%, the rate in the Rest of Leinster was 1.4%

The survey, which is based on a combination of a member sentiment survey and tender returns, was conducted in July when Covid-19 continued to have an unprecedented impact across all aspects of society.

Micheál Mahon, President of the SCSI, said the significant slowing of tender price inflation can be attributed to Covid-19, especially the adherence to lockdown measures as well as concern from contractors with regard to future workload.

“COVID has had a sharp and immediate impact on the level of tendering activity, and in turn tendering rates as many construction firms focus attention on securing projects for 2021. While large scale projects in the data centre and pharmaceutical sector continue to be very active since the reopening of construction sites in May, there has been an increased level of caution regarding funding new developments generally.”

“It remains to be seen what proportion of projects that were paused get restarted. Another key factor will be the level and timing of capital investment included in the upcoming Budget. Given the current level of uncertainty we are forecasting a similar level of 1% inflation for the second half of 2020.”

The SCSI has expressed concern over the future impact which Covid-19 and a no deal Brexit could potentially have on the sector. Micheál Mahon said the Government should use Budget 2021 to help modernise the sector.

“Ireland is seen as a tech friendly country but to date that is not as evident in the construction sector. We need to develop a construction tech hub to foster innovation and increase the resilience of the industry to external challenges and the changing world of work. We also need to make our systems of public tendering more efficient and remove exclusionary criteria. We are working closely with the Department of Public Expenditure and Reform and other industry stakeholders in this respect and we hope to see significant change in this respect within the coming years.”

Article Published: 29/09/2020