The construction boom is showing no signs of slackening off and output in the current year is likely to rise 9 per cent to £14 billion (€18 billion), according to the Department of the Environment's annual review of the industry.

The forecast of 9 per cent growth this year from the Department follows growth of 12 per cent in 1999.

However, the Minister for the Environment, Mr Dempsey, has warned that the construction boom is now stretched to its limits, reflected in the fall in the number of tender bids and escalating tender prices. The report shows that average tender prices for building projects rose by 12 per cent last year and are forecast to rise by a further 12.5 per cent in the current year.

"This means that the purchasing power of the Government's investment in construction projects, under the Public Capital Programme, has fallen by around one quarter in the last couple of years," said Mr Dempsey. "Clearly this rate of inflation in tender prices is unsustainable and we must increase construction capacity to moderate the supply side constraints," he added.

The Minister said that he expects to shortly receive the final report of the Forum for the Construction Industry and to formally announce a mechanism to implement that report's recommendations.

Commenting on the report's statement on tender prices, Construction Industry Federation director general Mr Liam Kelleher said: "The cost of doing business has risen for a variety of reasons including increased land cost, specialist sub-contracting costs and labour costs and reflects capacity pressures in the industry and economy generally.

Mr Kelleher added: "A key challenge for the industry is to continue to extend capacity to meet the demands that an economy growing at 8 per cent creates. "This is significantly higher than the 5.6 per cent growth forecast for the economy when the National Development Plan was published only a year ago."

The report shows that the Public Capital Programme accounted for 27 per cent of construction spending last year, or a total of £3.8 billion. Direct employment reached 142,000 in 1999 and is forecast to grow to 162,000 in the current year, an increase of 14 per cent.

Building industry unemployment is now estimated at 4 per cent, which the report says constitutes full employment in the sector.

When allowance is made for off-site employment in the offices of building professionals and factories producing building products, total employment in the industry is 224,000, or one in seven of the 1.65 million people at work.

An all-time record 45,000 houses were built last year and the Department expects over 50,000 new houses to be completed in the current year.

Overall residential construction output last year was up 9 per cent, with 8 per cent growth forecast this year, while private non-residential construction increased by 7 per cent and is forecast to grow by 9 per cent in the current year.