In other high-income European countries an average of 15pc of building workers are in large companies, compared to Ireland’s 9pc.
“This partly explains why construction productivity is lower in Ireland,” said Niall Conroy, the chief economist of the fiscal council. “Large firms tend to have the latest technology and manufacturing methods and hence have higher productivity.”
It is estimated that Ireland needs 80,000 more construction workers, 45pc more than it has at present, to deliver the required infrastructure, especially housing. Inward migration, and workers moving from other sectors into construction, are not going to fully bridge the gap.
This has turned to focus onto increasing productivity of the existing workforce, particularly as it is 30pc below the European average.
“Low construction productivity is partly a legacy of the financial crisis, when many construction firms went bust,” Mr Conroy has said in a new research paper.
“Those that survived have, understandably, been cautious about investing in new technologies or manufacturing facilities. These firms know how quickly Ireland’s construction sector can swing from boom to bust. As a result, modern construction techniques are also less widely adopted in Ireland.”
The construction sector is dominated by small and medium-sized firms, where productivity tends to be lower. Home building, in particular, suffers from a lack of scale, with the top 10 builders accounting for only one in three commencements in 2023.
The 10th-largest home builder in Ireland started just 250 units that year, according to a previous analysis by Dermot O’Leary, chief economist with Goodbody. Overall, up to 500 other builders and contractors included in his study would have started on average just 34 units each.
Looking at reasons why there are not more large firms, Mr Conroy points out that as a relatively small country, Ireland may lack the scale needed to attract them here.
“Limited availability of land is another factor. Recent analysis has highlighted a shortage of zoned land in urban areas, especially Dublin. This often means that only small parcels of land are available for development. Naturally, these lead to smaller-scale projects, which are typically taken on by smaller firms,” his report said.
The number employed in construction increased to 176,000 last year, just over 6pc of all jobs in the economy. It peaked at 237,000 construction workers in 2006, at the height of the Celtic Tiger economic boom, equivalent to 11pc of total employment.
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