Minister McGrath's speech at CIF Annual Conference 2022 in Croke Park

‘Supporting capacity and innovation to deliver on the National Development Plan 2021-2030’

Check against delivery

Good Afternoon,

Thank you for the invitation to speak at your Annual Conference. It is a pleasure to address the membership of the Construction Industry Federation at such a pivotal moment for the construction sector and indeed for the country as a whole.

I want to thank Frank Kelly, President of the Federation and Tom Parlon, Director General. I have worked closely with Frank and Tom and the team throughout the year and in the lead up to Budget 2023. This engagement is valuable to me as the Minister overseeing public procurement and the National Development Plan, and I know this positive working relationship will continue into the future.

The theme of today’s conference is ‘Building a resilient industry’. This is very appropriate given the last two and half years we have all been through. As with other sectors of the economy, the construction industry has faced massive challenges over that period. However, the signs of recovery in the sector are clear. There are approximately 167,000 full-time and part-time workers in the construction sector; an increase of 40,000 over a 12 month period.

Over the last few years we have faced three economic shocks in Brexit, COVID-19 and now a terrible war in Europe. All of these shocks have brought their own unique challenges.

We all know that we are facing into global economic headwinds – uncertainty; rising interest rates; the cost of energy and inflation generally; weakening external demand; supply chain difficulties; labour shortages; – are all realities that you and indeed the government have to confront every day.

The good news is we are facing these challenges from a position of strength.

During the pandemic, €37 billion of public expenditure supports was made available to protect lives, support incomes and employment, and safeguard businesses.

The economic recovery from the pandemic has been rapid. Today, the Irish economy is among the best performing in the world.

Over 2.55 million people are now working in Ireland, which is a far cry from the levels of unemployment witnessed during the dark days of the pandemic. Employment in the economy is now 9% more than pre pandemic. This is reflected too in the unemployment rate which stood at 4.3% in September. Our public finances are healthy.

Last week, we are able to introduce an €11 billion package with no borrowing, while at the same time putting €6 billion into a National Reserve, and still projecting a Budget surplus for this year and next.

These are gains we should not take for granted, or put at risk. Having these resources gives us the capacity to respond further and do more in the event we need to across next year and beyond.

It was around this time last year that the government launched the €165 billion National Development Plan. Ireland’s population is now over five million and is set to grow further over the coming decades. To keep pace, we will need more schools, homes, hospital, and better transport infrastructure.

The NDP is the blueprint to get there. It provides government departments and the construction sector with the certainty that funding will be provided for capital investment over the coming decade.

This €165 billion will bring public investment to 5 per cent of GNI*, which is well above the recent EU average of 3 per cent of GDP. This record capital investment will sustain just over 80,000 construction jobs annually this decade.

Budget 2023 has made a further €800 million available next year for capital investment. With capital carryover from this year, the amount available next year will be well above €12 billion.

The NDP is not, however, just a matter of allocating money to different projects and departments. Earlier this morning, you heard from various contributors on how Ireland can improve delivery including from the Secretary General of my department, David Moloney. Under the NDP, a number of initiatives have been undertaken in that regard.

The Project Ireland Delivery Board oversees the delivery of the NDP and has been an effective forum where issues from across the system can be raised.

Recently, the Board was expanded to include five external members bringing additional expert knowledge, independent and regional perspectives, and an enhanced challenge function to the deliberations of the Board.

The Construction Sector Group (CSG) is a wider group that brings together key industry stakeholders and government departments and agencies. The main function of this Group is to increase collaboration and engagement among the principal decision makers and to improve productivity within the sector.

In the last year, my department has awarded funding for the establishment of the Build Digital Project led by TU Dublin and partners. 58 industry members are participating in this project, working on five pillars, and the team is currently working on the annual survey which I encourage everyone here to complete.

The annual survey is vital as a benchmark to identify the digital adoption needs of the construction industry for SMEs, contractors and others for the next number of years.

In addition, work has also commenced on the planning for a Housing Demonstration Park for Modern Methods of Construction at Mount Lucas.

CIF has done considerable work under the CSG Innovation and Digital Adoption Subgroup. The CIF has published three reports related to Modern Methods of Construction.

These reports contain important recommendations for the industry to flourish in terms of skills, standards and governance. The transitioning from traditional on-site construction to a more manufacturing based model, with off-site prefabrication, will play an increasing role in the future.

Work is currently ongoing by the public and private sector to analyse the present and future needs for the adoption of Modern Methods of Construction, and the barriers to MMC in Ireland’s construction sector.

Furthermore, in July the Construction Technology Centre was launched which is to be led by consortium of NUIG and partners and is funded by Enterprise Ireland. It is intended that some projects will start shortly.

Additionally, the Built to Innovate Initiative was announced in March 2022, which will provide funding for productivity and innovation projects to Irish companies which have a minimum of 20 percent of revenue from homebuilding.

The NDP sets out the range of actions that are being taken to strengthen the delivery of major projects, to maximise value for money, and to ensure that projects are completed on time and on budget.

A number of major projects have received important advice and recommendations from the Major Projects Advisory Group, which I established in December 2021. The purpose of the Major Projects Advisory Group is to strengthen scrutiny of capital projects, with an overall aim to achieve better value for money by increasing governance, robustness of costings, and delivery feasibility.

It is critical to improve delivery that projects are well defined from an early stage. I know for many of you, this is important for you to better assess costs and timelines.

I recognise that the industry has faced many challenges as a consequence of the pandemic. The situation has been made ever more challenging with the invasion of Ukraine.

The war has led to greater supply chain issues and increased prices across a range of construction materials such as structural steel, copper and insulating materials. Of course, the cost of energy is also having a major impact.

In order to safeguard the delivery of key NDP projects, back in January I introduced measures to address inflation for new contracts and tenders. These measures included reduction of the fixed price period of contracts to 24 months.

In May, I introduced a form of price variation or burden sharing to ensure that taking on public works contracts remains a viable proposition. Under these measures, additional inflation costs will be apportioned between the parties to the public works contract, with the State bearing up to 70 per cent of the additional inflationary related costs.

Earlier, you heard from David O’Brien from the Office of Government Procurement and he outlined the key aspects of the review of the Capital Works Management Framework. The changes arising from this review will improve the public procurement process over the coming years, and will result in further reforms to the Public Works Contract.

Ensuring that people have access to affordable and secure housing remains a top priority for this government. You have heard today an entire segment on residential delivery which shows that it is also a key priority for the construction sector.

Housing for All was launched just over a year ago and through the funding provided by the National Development Plan, over €4.5 billion in public money is being made available next year to provide more social, affordable and cost rental homes.

We have seen the highest number of completions in over a decade and over 28,000 residential units have been commenced nationally. The number or First Time Buyers is at its highest in fifteen years, with 16,000 purchasing homes in the past 12 months.

We are making progress, but it is clear that more needs to be done, and the sector is facing difficult challenges.

Home ownership is at the core of the Housing for All Plan and the First Home Scheme, which is designed to make it easier for first time buyers to buy new build homes, was recently launched. In addition, the Help to Buy Scheme has been extended and over €60 million is being allocated to schemes, like Croí Cónaithe, to tackle vacancy and promote regeneration in urban areas.

We are also seeing the first cost rental and affordable purchase homes coming online.

As you all know, the planning system is often cited as one of the main delays in housing projects. The system is far too complex and unwieldly and far too many projects end up in a Judicial Review.

The Attorney General is currently working to consolidate and simplify the legislation and it is expected that legislation will be brought forward in the coming weeks.

Budget 2023 also sees €13 million in additional funding being made available for increased investment in the planning system, which includes additional resources for An Bord Pleanála, local authorities, Office of the Planning Regulatory (OPR), and the funding of the new agency to regulate development in the Maritime Area, the Maritime Area Regulatory Authority.

Earlier this week, Minister Darragh O’Brien announced a series of reforms to An Bord Pleanála. We need a planning system that we have full confidence in, while at the same time enabling the delivery of key projects in a timely manner.

I do want to touch on the defective concrete products levy announced in the Budget. The context here is the government has signed up to a Mica redress scheme that has an estimated cost of €2.7 billion. Minister O’Brien has also published the report of the Working Group examining defects in apartments which put the cost of remediation at up to €2.5 billion. The government will have to respond to this report in due course but, however you divide it up, there is a bill between the two schemes that could exceed €5 billion.

We have to ensure, as a government, that our national finances are managed in a credible way. We don’t have to look too far to see what happens when the markets turn against you.

This is the backdrop to the levy announced last week. That said, we will listen to the concerns that have been expressed by many about the impact of the levy and Minister Donohoe and the government will give careful consideration to all of these issues over the weeks ahead as the Finance Bill passes through the Oireachtas.

Earlier you heard from my colleague, the Minister for Further and Higher Education, Research, Innovation and Science, Simon Harris.

The government recognises that without more construction workers we will not be able to deliver the National Development Plan, the Housing for All Plan and the Climate Action Plan.

The government continues to invest and support the delivery of apprenticeships throughout the country. Indeed, 2021 saw a record number of construction apprenticeship registrations at 4,870. As of end August 2022, there are almost 6,000 apprentices registered in the construction sector. Budget 2023 provides for 2,000 additional craft apprenticeship training places.

The Housing for All Future Building Initiative, funded under the Housing for All was launched earlier this year and it seeks to engage directly with jobseekers supporting them through training and skills development and matching them with employers.

Improvements have been made to enable the granting of more work permits linked to the construction sector which will enable the industry to attract more workers from outside Ireland.

Also this year, the Apprenticeship Employer Grant of €2,000 per employer per apprentice hired was introduced. It is estimated that over 27,000 additional workers will be needed to deliver 33,000 homes per year, and a further 17,000 will be needed to implement the national retrofit scheme.

I welcome the fact that the next panel discussion today will consider ‘Recruitment and apprenticeships in the construction sector’. The work of National Apprenticeship Office under Dr Mary-Liz Trant will be a vital cog in the wheel in terms of efforts to increase recruitment and retention of apprentices in the construction sector.

Ireland is committed to doing its part to tackle climate change. We have published the Climate Action Plan which sets an ambitious target to reduce emissions by 51 per cent by 2030.

We have established a new national retrofit scheme which provides homeowners with a 50 per cent grant for deep retrofits and an 80 per cent grant for cavity wall and attic insulation. We have committed €8 billion out to 2030 for retrofitting and I am sure the construction industry will respond to this commitment in the coming years.

Work is also underway to improve sustainability in the construction sector and to reduce waste from construction and demolition projects. I want to acknowledge the Digital Adoption Subgroup of the CSG who are also working to enhance sustainability in the construction sector.

In conclusion, we all share the ambition contained in the National Development Plan, the Housing for All Plan and the Climate Action Plan, and we all want to deliver on that ambition. It is for that reason that we need to continue to work together as we have done over the last number of years. Through collaboration and engagement in forums like the Construction Sector Group, we can meet the challenges facing us.

Today’s conference covers a number of essential topics and I hope you have found them informative and engaging.

I am confident that the industry will continue to demonstrate its resilience in terms of meeting the challenges ahead and I am equally confident the industry will deliver the infrastructure projects the country needs in the decades to come.