CIF Report

The CIF became the third organisation in as many weeks to release performance figures for the top building and specialist contractors in Ireland for 2017. Turnover amongst these 50 contractors alone rose to €6.72 billion over the last 12 months.

These positive industry news blasts are punctuating what has been a concerning few months in terms of the number of Irish building firms going to the wall in the first half of 2018.

You might recall that we wrote several weeks ago about their fragility of the industry supply chain here in Ireland – although that is certainly not a uniquely Irish trend, we are seeing this play out globally.

While recent news has focused on very high profile collapses, we know that several hundred businesses went into the liquidation process in the first six months of the year.  At a time when the industry needs some positive news, it was great to see the top 50 contactors celebrated. It is a testament to the continuous upskilling within the industry in terms of management performance,  innovation and adoption of new technologies. This is coming from an industry that traditionally would have been (and many ejemevrd remain) quite slow to change. Over the past two decades Irish engineering firms, contractors and developers adopted lean methodologies to  drive efficiencies in their businesses,which had a knock-on effect across the industry. These early adopters, unsurprisingly, were first to adopt, develop and enhance BIM technologies and automation, which are crucial for servicing foreign direct investment clients. But it doesn’t stop there. What we are seeing playing out in the marketplace today is that the early adopters from two decades ago had the agility and skills to survive the downturn and therefore were well positioned for when activity started to pick up. These industry leaders  were also in a position to invest in emerging technologies and training which helped them to attract the best staff.

The effects of this are now being felt by firms who struggled just survive during the downturn and who failed to invest in key staff or keep up-to-date on industry innovations. Clearly the juxtaposition of the increasing number of building firms failing financially, against the  huge turnover growth of the leaders in the industry shows that the gap between the two types of firms is ever widening.

The tightening of margins is putting less efficient builders under pressure, they simply do not have the tools to compete. We know that these tight margins are among the leading causes of insolvency across the industry, together with Poor private tendering practices and an onerous public procurement process. Industry representative bodies are currently  lobbying government to change damaging public procurement processes like fixed-price projects that must be agreed to without a credible brief. They are also educating their members about the unsustainable nature of lowest price tendering. The third element here – that is the efficiencies of the firms in question –  is solely under the control of the individual firms and generally is subject to the limitations of management who feel that they don’t have the resources to upskill, yet not seeming to realise that they cannot afford not to.

We all know that the marketplace has changed. Just because building activity has increased and the challenges we face look different to those challenges we faced a decade ago or five years ago it does not mean that they are any less challenging or less impactful.  As always, we would be interested to hear your take on this…

Comment:

“Hello Ian
A response to your to informed and well judged email I feel the problem goes much deeper I have worked in USA /Canada and UK during our down turn so am well experienced in methods used in other countries I feel that we make little use in this country of off site prefabrication’s for instance one example which there are many prehung door set and kits (Door is fully completed with frame hinges locks painted fully completed off site and half of on site cost) saves on time and labour and costs, installing time 15min and can be installed by unskilled labour ., I think the best example I have come across is the ftse quoted uk builders in particular Taylor wimpey (I have worked for both Persimmon and TW ) and the efficient way they can build with their economical use of material and their organized use of labour the roof trusses for instance they use contains far less material but still within building regs requirment and is more labour friendly to install due to design than anything we are currently using in Ireland and is more than sufficient to still comply with our current Irish building regs I feel and know due to my many friends and contacts that the majority of contractors and developers are still building as they did in late 90s and early 00s but I do feel they fail to realize the speed and skill of the labour in those years, construction labour will never be as productive again and neither will the understanding of construction I fear so I do feel the carillon type scenarios will be more of the norm than the exception in the coming years and I am aware that quiet a few are starting to feel the pinch even in this early stage of the cycle.

Best Regards,
Michael Flaherty”

Ian Lawlor
086 3625482

Director / Business Development
Lotus Investment Group