Construction Industry Ireland 2006 versus 2011

I recently took out my copy the Irish Construction Industry magazine’s top 200 construction firms from 2006. I was prompted to this by the news that Bowen had gone bust and was keen to find out how many of the then top 20 had since gone under.

Here are the numbers. I took out the first 3 companies - CRH, Grafton Group, & Kingspan as they are not contractors / developers. Of the remaining 17, seven are now gone. They are McNamaras, Pierse, Bowen, Ballymore, McInerney, P Elliotts, and Flemings. The oldest of these companies was established in 1909 – so they traded through 2 world wars, countless recessions, the 1929 depression but they could not continue through this crash. If you take the combined experience of all 7 companies it amounts to 375 years. In 2006 they employed 4163 employees directly with many more employed by sub-contractors and suppliers. And it won't stop there. At least a couple more in the list are being eyed as the next to collapse this year or early next.

We seem to be immune to these figures now but I think they are worth noting. I understand that a number of these companies made decisions and took risks that ultimately contributed to their downfall. But a the same time there has been nothing by way of help for these companies or the industry in general. It has been let down. Granted there is very little in the kitty to invest, but processes and legislation could have been introduced to insulate the industry at least a little against this onslaught. It just wasn’t politically expedient to do so.

I would be interested in hearing views on what one change (capital investment aside) could be made to the systems / processes surrounding the construction sector that would create an impact. Depending on the amount of responses perhaps we can do something with the information.

Jobs Initiative: Costing more than the job’s worth

After well over 100 days in office, the Government needs to get stuck into fixing policies that are impeding job creation instead of creating new ones, writes Paul O'Donnell for Business & Finance.

Paul O’Donnell is business director with Hays Ireland

There is no greater issue facing the country than the jobs crisis. The Government is clearly aware of this but the content of the Jobs Initiative highlighted some ambiguity over its  role is in handling the problem. The question of governments directly creating employment has historically been an ideological position, with the right arguing they should have nothing to do with it and left advocating a more hands-on approach.

Given the depth of Ireland’s jobs crisis, we do not have the luxury of adopting ideological standpoints but instead need to be entirely pragmatic.

Government-created jobs or “make-work” schemes tend to be unsustainable and only serve to paper over the problem that is the alarming Live Register figures, while work created through private enterprise is sustainable and generally leads to more job creation. The Government could significantly help by creating a set of conditions that give private enterprises –  both new and existing – the best chance of surviving and generating profit and growth. This is what will put a dent in the 440,000 Live Register figure, not proposals put forward by the Jobs Initiative.

The proposed €30 million investment into a schools project illustrates this point. Building schools only makes sense within the context of an overall educational infrastructure development strategy. It should never be used as an initiative to help create work for unemployed builders. If that’s the case, the money would be better spent elsewhere. We would all agree that the construction industry needs all the help it can get, but a more productive proposal would be to tidy up the policy and legislation which concern this decimated sector.
An example is the procurement process for public construction jobs – just like the proposed schools projects. Departments currently operate on a ‘lowest bid wins’ policy. This has created a situation where building contractors are in such fierce competition to win the work they are submitting tenders at 30% below the cost of delivery. This invariably leaves the contractor, all their sub-contractors and their suppliers in an extremely precarious position. And as recent evidence has shown, the financial burden of under-cutting becomes too much and the contractor goes out of business. So everyone in the supply chain loses their job and their income.

This problem has been well publicised by the CIF and other bodies, since the start of the recession. So why does the issue still exist? Cordil Construction went bust as recently as May 2011 while in the process of delivering more than €20 million worth of State projects – most of them schools. Is it wise to release a further €30 million worth of school projects for the purpose of increasing employment if the procurement issue remains unresolved? Construction companies that get these “created” jobs will just continue to go out of business and take many others from the business with them.

Another interesting part of the Jobs Initiative is to ensure that jobseekers have access to relevant training programmes to produce the requisite skills to fill the current jobs on offer. The Government’s pledge is to create more than 20,000 internship placements. The goal of keeping people’s skills fresh is very valid and internships are a useful way of achieving this. The problem is that FÁS will be charged with delivering this. ESRI research has recently noted that jobseekers going through the National Employment Action Plan are 17% less likely to secure onward employment than those who complete their job-hunting on their own. So it seems that using the FÁS service actually harms your chances of securing employment.

We have had internship programmes for some time now. Much was made of the last one that commenced in 2009. This was also managed by FÁS and appears not to have achieved much – the Live Register still looks much the same. There is nothing wrong with internships – they make sense, especially in this economic context, but until FÁS is completely overhauled there is no point in creating another internship programme.
However, it seems that meaningful transformation continues to evade FÁS. A gruelling change programme is certainly what is needed. Minister Burton has vowed to complete it but we haven’t seen any details or timeframes. Announcing training and internship initiatives is fine but is it not a case of putting the cart before the horse?

After well over 100 days in office, the Government needs to get stuck into fixing policies that are impeding job creation instead of creating new ones. Is it a case that pouring over processes and legislation doesn’t grab the positive headlines the way a ‘Jobs Initiative’ does? But this is why we have a government, is it not? Research by Vision Net in May shows that a drop of 42% in first-time business directors from the same month last year. An interpretation could be that the morale of entrepreneurs seems to be breaking. There is a growing frustration that the wheels of change and reform move too slowly in Ireland. A worrying thought – as it is innovative entrepreneurs that are going to lift us out of the economic crisis, not government make-work schemes.

Instead of trying to create jobs, the Government should have a series of projects aimed at fixing the broken systems and processes in the country. Engaging and consulting with affected businesses and representative bodies is crucial. Once the strategy is formulated then communicate the details to the public. Our own research in Hays highlighted that almost two in three Irish professionals don’t know what the Jobs Initiative is. This would suggest a growing cynicism towards initiatives that seem to focus on sound-bites.
The electorate is sophisticated and well-informed and the appetite is there for a really detailed plan, so give them the minutiae.

Knowing that the people charged with running our country have a real handle on the details would provide comfort and encouragement no end.