Events Centre developer says construction industry in a 'fragile state'

Events Centre developer says construction industry in a 'fragile state'
BAM chief executive Theo Cullinane has warned that the construction sector is in a fragile state. He's pictured here with former Lord Mayor of Cork Cllr Chris O'Leary; former Tanaiste Joan Burton, Minister Simon Coveney, CEO of live Nation Ireland Mike Adamson, and former Taoiseach Enda Kenny when they  ‘turned the sod’ on the €50m Cork Event Centre back in February 2016. Work has stalled on the project.

CONSTRUCTION chief Theo Cullinane has highlighted the ‘fragile state’ of the industry, pointing to the poor availability of labour, rising costs and ongoing inflation as concerns.

The chief executive of BAM made the comments when announcing the company’s financial performance for 2017, which saw revenue of €465 million, an increase of 29% on 2016. It includes a pre-tax profit of €15.9 million and a cash balance of €162.5 million.

BAM’s projected turnover in 2018 is €545 million.

The company’s performance was aided by strong activity in the construction sector in Ireland and abroad, including the commencement of work at the new children’s hospital in Dublin, according to a statement issued.

In Cork, the company is currently constructing student apartments on South Main Street. It is involved in a joint venture with Clarendon to develop offices and apartments on Horgan’s Quay, while there is a live planning application regarding a hotel and office development on Sullivan’s Quay. 

Theo Cullinane, Chief Executive, BAM Group 
Theo Cullinane, Chief Executive, BAM Group 

BAM is also still awaiting a government decision on a request for additional funding relating to the events centre project.

Mr Cullinane welcomed the positive moves but signalled a note of caution for the construction sector in general.

He said: “While there is year-on-year growth in the construction industry, it continues to remain in a fragile state, where the residential and civil engineering sectors are still very much challenged. The publication of the 2018-2027 National Development Plan is welcome but its investment needs to be brought forward more quickly.

“Margins and reinvestment in businesses are too low, while obligatory risks are too high. Hugely risky under-pricing of work and risk remains, and below-cost tenders are still being accepted by procurement authorities. This is evidenced by recent examples of company failures and bad construction practices, and the devastating effect this has on the supply chain.”

He also highlighted the availability of labour, rising labour costs without the possibility of recovering these costs and ongoing inflation as areas of concern.

Mr Cullinane also reflected on taxation issues and said more could be done to make homes affordable for buyers.

He said: “There has been much discussion about the 13.5% VAT rate on house construction, but the total contribution to the exchequer from the sale of a new home, as a percentage of the sales price is 36%, as set out by Grant Thornton in a report prepared for the CIF. This should be part of any discourse around ‘affordability’ which is entirely within the Government’s control.”

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