A WARNING against the dangers of overheating and over-investment in the construction market was issued this week by Michael Webb, managing director of Patterson Kempster and Shortall, in the firm's annual review of the construction industry.
His caution follows the Construction Industry Federation's call for accelerated investment in the sector.
PKS predicts a growth of 4 percent in volume in Irish construction during 1996, compared with 11 per cent in 1995.
"The substantial growth recorded in 1995 led to contractors order books slowly filling up as the year progressed. Each major project absorbed a proportion of available resources, until most contractors and sub-contractors had a comfortable workload.
However, the years of decline took their toll on available resources, particularly in the area of skilled craftsmen and sub-contractors.
As a result, when the upturn came, it was not long before the reduced resources were strained and in certain circumstances overheating occurred," said Mr Webb.
"An obvious example of this overheating occurred last year in bricklaying. While the underlying inflation rate was low at 2.4 per cent, the prices for brickwork and blockwork rose by 25 per cent to 39 per cent.
"In addition, prices for electrical work also increased by up to 50 per cent. Soon, 1995 became a sellers' market."
He suggested the industry needed steady growth rather than accelerated growth - which would seriously overheat the construction industry and lead to inflationary pressures.
Turning to 1995, the review acknowledges the phenomenal growth in the construction industry, with every sector showing real increases in volume.
"Public building, fuelled by the Public Capital Programme and the EU Structural Funds, led the way with a 24 per cent increase in volume. Housing, both social and private, grew by 8 per cent. Apartments in designated areas, low interest rates and the general growth in confidence within th( economy all helped to boost the sales of new houses and apartments.
"Although contractors grumbled about the small number of new projects coming on to the market the construction and completion of a number of civil engineering projects including major by-passers and bridges helped return civil engineering to a growth pattern. Overall, the volume of building increased by 11 per cent last year - the largest increase recorded since 1990."
The review calls for the continuation of the EU Structural Funds, which are due to be terminated after 1999.
"The present healthy state of the construction industry and the Irish economy owes much to the substantial funds flowing from Europe.
"PKs calls on the Government to re-negotiate a continuation of these funds for a further six years. The government, under the auspices of the EU presidency and the forthcoming intergovernmental conference should make a strong case for a run-off period.
"PKS is aware that the present level of EU funding cannot continue indefinitely but the EU cannot expect Ireland to adapt overnight to the abrupt termination of up to £2 billion in 1999. Inevitably, there will be some slippage in the expenditure of these funds in 1998 and 1999 and Ireland should be allowed to spend this in 2000 and 2001 together with a continuation of funding at a lower level for a further four to five years."
