From Department of Public Expenditure, NDP Delivery and Reform
By: Minister for Public Expenditure, NDP Delivery and Reform; Michael McGrath
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Round Room at the Mansion House, Dublin 2 - 19.50 - 20.00
Thursday, 13 October 2022
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Good evening everyone,
Thank you for the invitation to speak at the inaugural all island Octabuild Builders Merchants Excellence Awards 2022. It is a pleasure to address the Octabuild Companies and Builders Merchants at such a pivotal moment for the construction sector and the country as a whole. The construction industry is a vital sector for the economy which currently employs approximately 167,000 workers.
I want to thank Ray Molyneaux, Chairperson of Octabuild for the invitation.
Just last week, I attended the CIF’s annual conference in Croke Park. These engagements, including tonight’s awards ceremony, allows me to hear first-hand from the industry, and indeed builders merchants, about the challenges and opportunities in the sector.
As Minister for Public Expenditure and Reform, I am overseeing public procurement and the National Development Plan. The member companies of Octabuild are vital stakeholders in the supply chain delivering the projects outlined in the NDP. I want to acknowledge the work carried out by Octabuild member companies and associated builders merchants, particularly adopting to the many challenges faced during COVID-19.
I also want to recognise the work that Octabuild is doing in enhancing knowledge and standards in the Irish Construction Sector. I am aware that last year Octabuild sponsored the HAI Certificate in hardware retail and merchanting. It is great to see that Octabuild is committed to promoting the development of skills and expertise and high quality Irish manufactured products for the building, construction and DIY sectors.
Tonight, I am thrilled to present awards across a number of categories, including (1) Excellence in Business Management, (2) Customer Service, (3) Sales & Marketing, (4) Sustainable Business and (5) Community Outreach, along with the Rising Star Award and other regional awards.
The Excellence in Business Management award includes criteria related to health and safety protocol and initiatives, which is of particular importance during health and safety week which is currently ongoing.
I am aware that for the first time in the history of the Octabuild awards, that this event is an all-island competition to recognise excellence in the builders merchant trade on the island of Ireland. This provides opportunities for enhanced collaboration, in terms of learnings and innovations.
Additionally, it builds on the Shared Island investment priorities, identified in the NDP, which are; a more prosperous island, a more connected island and a more sustainable island.
These investment priorities are backed up by the Shared Island Fund, with €500 million in capital funding available out to 2025. This funding will support investments in North/South projects such as the Ulster Canal restoration and Narrow Water Bridge projects, supporting the delivery of sustainable tourism and recreation amenities for the border region. Budget 2023 will see €100 million in funding under the Shared Island Fund. This will support all-island supply chains and networks, including at ports and airports and cross-border approaches to attract investment, including through the North West City Region and the Dublin Belfast Economic Corridor initiatives.
Over the last few years we have faced three economic shocks in Brexit, COVID-19 and now war in Europe. All of these shocks have brought their own unique challenges.
The economic recovery from the pandemic has been rapid as society and the economy successfully reopened. Irish GDP grew by 1.8% in Q2 2022, which represents an 11% increase over 12 months. This growth is reflected on the domestic front with Modified Domestic Demand growing by 4.3% in the second quarter of this year which is 9% above the pre-pandemic level in the fourth quarter of 2019. This makes Ireland one of the best performing economies amongst its European peers.
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, hospitals and other pieces of vital 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 which Minister Donohoe and I presented last week will make a further €800 million available next year for capital investment. With capital underspends from this year, the amount available next year will be well over €12 billion.
The NDP is not, however, just a matter of allocating money to different projects and departments.
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 principle decision makers and to improve productivity within the sector. An Innovation and Digital Adoption Subgroup is working to deliver on the seven actions in order to increase innovation and productivity in construction.
In the last year, my department has awarded a grant of €2.5 million to the establishment of the Build Digital Project led by TU Dublin and partners. Fifty eight industry members are embedded in this project, across the five important pillars of (1) Digital Leadership & Cultural Change, (2) Digital Standards, (2) Digital Education and Training, (4) Digital Procurement and (5) Sustainability and Circular Economy.
Work is also 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. In addition, work has also commenced on the planning for a Housing Demonstration Park for Modern Methods of Construction at Mount Lucas. This Demonstration Park is expected to be delivered this time next year.
Furthermore, in July the Construction Technology Centre was launched which is to be led by consortium of the University of Galway and partners, and is funded by Enterprise Ireland. It is intended that some projects will start shortly and will be completed by the end of this year.
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. Essentially, the funding is for those house builders who will deliver innovation and demonstrate considerable impact on the cost of home building in Ireland.
Among the eight core values of Octabuild, there is a strong commitment to innovation. Among companies and as a group, members are committed to adapting and evolving for the future of the industry. Given the last two years of substantial challenge for the construction industry, I am confident that Octabuild will continue to encourage and foster the benefits of high quality and Irish manufactured products for the construction sector in Ireland, responding to the opportunities presented in the NDP, Housing for All and the Climate Action Plan.
The eight Octabuild members - Dulux, Etex Ireland, Glennon Brothers, Grant Engineering, Gyproc, Irish Cement, Kingspan Insulation and Wavin Ireland – as well as the Builders Merchants that will receive awards tonight are demonstrating excellence in their work practices which contribute to the provision of an efficient and sustainable supply chain delivering housing, schools and hospitals across the island of Ireland.
As I pointed out at last week’s Construction Industry Federation annual conference in Croke Park, 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 war in 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. Builders merchants have been at the coalface of these supply chain challenges. I want to acknowledge your efforts in continuing to ensure a steady supply of high quality materials to our growing construction and built environment sector over these challenging times.
In order to safeguard the delivery of key NDP projects, in January 2022, I introduced measures to address inflation for new contracts and tenders. These measures included reduction of the fixed price period to 24 months from the date of the award of the contract.
Furthermore, in May 2022, I introduced a new set of measures for ongoing projects. 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.
The feedback I have received from my department would suggest that parties are engaging and, crucially, works are progressing in the majority of cases.
Ensuring that people have access to affordable and secure housing remains the top priority for this government.
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 of 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.
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 €61 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.
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 September 2022, there are over 6,000 construction apprentices registered. When combined with apprentices in electrical and engineering, the total construction apprenticeship population at the end of September 2022 was over 16,000.
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 apprenticeship 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.
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 and builders merchants will respond to this commitment in the coming years.
The national retrofit scheme will require leading manufacturers in the industry to continue their ongoing innovations in terms of digital adoption and modern methods of construction. The National retrofit scheme will see firms develop and bring to market more energy efficient and sustainable products to decarbonise our built environment towards a net zero economy by 2050.
Builders’ merchant stores are showing leadership in respect to sustainability and waste management. Indeed, one of the awards tonight will acknowledge this work with the ‘Excellence in Sustainable Business’ award. Sustainability initiatives benefit the environment whilst also increasing productivity and returns – a win-win for those companies that have transitioned to more sustainable ways of working.
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 Innovation and Digital Adoption Subgroup of the Construction Sector Group under my department 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.
Tonight’s awards are an opportunity to acknowledge the builders merchants firms that are at the forefront of delivering the goods and services which are essential to the proper functioning of our construction and built environment sector. I congratulate all those who will receive their awards tonight.
The National Development Plan underpins the government’s commitment to deliver significant capital infrastructure out to 2030, supported by €165 billion in funding. I am confident that the construction industry supported by a strong builders merchants trade will continue to demonstrate its resilience in terms of meeting the challenges ahead.