Despite the enormous economic progress made in Ireland over the past decade, major concerns remain about infrastructure deficits and their capacity to erode our competitiveness and attractiveness as a location for foreign direct investment (FDI). According to a recent report by the Irish Fiscal Advisory Council, Ireland’s infrastructure is 25 per cent below average among high-income European countries. The council identified four key areas of concern: housing, health, transport and electricity.
Capacity constraints will make it difficult to address these deficits quickly, the council notes. One of the biggest issues here is that many projects require more construction workers, with an estimated 80,000 additional workers needed to address Ireland’s infrastructure deficits overall, a 47 per cent increase on current numbers.
Compounding this problem is the fact that productivity in the construction industry is around 30 per cent lower in Ireland than the EU average.
Liam McCabe, chairman and head of the projects and construction department at law firm William Fry, says the sectoral deficits can broadly be identified as housing, electricity, gas, water, public transport and under funding in third-level education.
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“These types of challenges are not unique to Ireland and are features of many modern economies,” says McCabe. “However, in a relatively small and very open economy with surging demographics, they are more impactful in Ireland.
“When competing for FDI, these are among the key primary metrics used by decision makers and we therefore have to be quick to respond to anything that does not reflect well on our offering. In simple terms, investors need to know that they can get access to a high quality, well-educated workforce and that their people will have homes available to rent or buy.”
Large energy users, he adds, which include data centres and pharma plants – which typically make very substantial investments providing long-term, high-value employment – need to know for certain that they can get connected to supply grids and that the cost of gas and electricity is competitive relative to other locations competing for their investment.
But although McCabe says there is no room for complacency, he remains optimistic.
“The level of competition for FDI has never been greater so there is no time to prevaricate,” he says. “The good news is that the infrastructural problems are well acknowledged by Government and increasingly by informed media commentary and consequently now by the public at large. That is a crucial step on the way to taking the measures required to address these issues. Ireland has always been able to dream big and deliver and we need to do that again in taking some bold steps to push through these challenges.”
Kim O’Neill, partner in projects and construction at Eversheds Sutherland, says that while there is no indication that the flow of FDI into Ireland will be compromised just yet, to remain competitive Ireland needs to address the infrastructure deficits identified.
“Ireland’s short and medium-term attractiveness is still there but it is important that Ireland be proactive now in addressing infrastructure deficits,” she says, adding that certain roadblocks need to be removed.
“When you talk to key stakeholders in the market they will say that they are all eager and willing to address the infrastructure deficits in Ireland but that the process to building infrastructure is taking twice as long now as it did 10 years ago. So, despite there being more need and demand now, it is getting tougher and slower to meet those same needs and demands.
“Getting initial sign-off, the planning process and funding are all issues resulting in this slowdown and stalling in meeting infrastructure needs. Improved planning legislation to fast-track strategic infrastructure and a focus on streamlining and encouraging the process would assist in helping to address these infrastructure deficits.”
O’Neill adds: “There is also something to be said about working on interconnectivity between our various infrastructure bodies so they can work together to create a timeline and ensure cohesion between projects so that they can all support one another in addressing the infrastructure deficits.”
Lorcan Sirr, housing policy analyst and senior lecturer at TU Dublin, notes that in discussions about infrastructure, everything associated with housing – roads, water transport, energy and waste management – is viewed as infrastructure, while housing itself is not. The distinction is important and needs to be addressed, he says.
“It leads to a different way of thinking so that housing is either left to the private market or the capacity of local authorities and housing bodies,” he says. “In the 1990s, we addressed the issues of our roads by building most of our motorway network, because we viewed it as a vital piece of infrastructure. If we viewed housing the same way the dial would shift.”
However, building more houses without addressing other infrastructure problems will only add to Ireland’s problems, Sirr acknowledges. He points out, for example, that in water supply the greater Dublin area is at 95 per cent capacity and that if the targets specified in the Housing for All Action Plan are met, there will be insufficient water to service all the new-builds.
“If you go to the level of 60,000 units being talked about or anywhere near it, you could certainly see planning applications refused because there is no water supply,” he says.