The number of construction workers rose in March for the second month in a row, according to latest figures from the Central Statistics Office (CSO).The annual increase of 1 per cent followed similar growth in February, but came after a year of negative growth in 2002.

The number of construction workers has, according to the CSO data, returned to levels last seen at the start of 2002.

A Construction Industry Federation spokesman cautioned against over-interpretation of the numbers, however, suggesting the growth was driven solely by seasonal factors in the house-building market, with general construction much less buoyant.

New housing accounts for slightly more than one-third of overall construction in the Republic, with the remainder coming in general contracting, civil engineering, and repair and maintenance work.

An unpublished economic analysis performed by the CIF shows it is expecting the volume of overall construction to decline by 5 per cent this year, following an estimated drop of 2 per cent in 2002.

Last year's decline equated to a loss of work worth €400 million, according to CIF calculations.

The research foresees a 13 per cent drop in the volume of general contracting activity in 2003, as Government cuts in public spending begin to bite. Civil engineering work will shrink by 9 per cent this year, according to the study.

"The civil engineering sector is most vulnerable to any dilution of the Government's infrastructure investment programme," the CIF warns. It expects house-building activity will grow only marginally this year.

Between 1994 and 2000, construction output expanded on average by 12 per cent per annum.

The CIF says the general outlook for 2003 "does not appear promising at this stage".

The economic analysis concludes that construction has entered a new phase, where demand will weaken and employment levels fall.