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Engineering & Construction Market Update Q1, 2020
2019 was an extremely busy year, with even stronger pipelines leading into 2020 for the majority of Ireland’s Construction and Engineering contractors and consultancies. This further reinforces the strength and confidence in Ireland as a prime location for foreign direct investment from many major Tech, Pharmaceutical, and Financial institutions. Currently, the highest levels of hiring and growth have been seen in Dublin and the immediate surrounding areas, with much less activity seen in regional areas, and the highest increases seen in cities such as Cork and Limerick. The key issue affecting the growth of the sector is the challenge of attracting and retaining Construction and Engineering professionals. This skills shortage is resulting in rising salaries and better working arrangements, which in turn further impact the margins companies previously secured on tenders. In addition, the record high employment rates in Ireland of 2.3 m (CSO) and the increasing number of projects are forcing some Construction companies to stretch their current resources beyond reasonable means, creating retention and attrition issues in what is a very buoyant market.
Construction and Property salaries have risen by 5.67 per cent in Dublin and 2.4 per cent regionally in 2019, in comparison to our last publication. Areas that have seen over 10 per cent increases are the Electrical, Civil Engineering and Commercial fields (Project Management and Quantity Surveying especially).
It is a busy market with demand for Construction professionals across all areas, particularly those at the intermediate level of experience (i.e., 3–5 years) which is largely a result of the lack of new graduates over a 5-year period as a result of the recession. This has resulted in attractive salaries and packages on offer for professionals with limited experience, resulting in steep learning curves for professionals and large knowledge gaps on many projects. Candidates looking to return from the UK are highly sought after and remunerated accordingly, especially Electrical Engineers, Quantity Surveyors, and Civil Engineers. Interestingly, the demand for Irish professionals based in Australia/UAE for over 4 years is smaller, largely due to their higher remuneration requirements, the greater difficulty in validating their international experience, and the differences in construction practices.
Retaining talent has become paramount to organisations, with 70 per cent of candidates we recently surveyed having received a pay rise in the previous 12 months, a key sign of the Construction companies’ effort to retain current employees. Furthermore, one of the largest frustrations experienced by most companies recruiting staff is the highly prevalent counter-offer, which is driving the increase in compensation packages being given to many staff. From our most recent data, the three areas that candidates find most important in their careers are
- Work–life balance
- Challenging roles/projects.
The most sought-after benefits by candidates are also
- Options of flexible working conditions/remote working
- Health insurance.
Extensive growth across sectors was seen in both new builds and fit-out projects, with over 123 cranes recorded in Dublin alone in 2019. Notable projects especially were Student Accommodation, Hotels and Commercial, and Data centres. Demand for professionals, especially Civil Engineers with Setting-Out and RC Frame experience, and intermediate Quantity Surveyors from main contractor backgrounds, starkly increased, largely driven by the need to offset noticeably top-heavy management structures on many construction projects in 2019. The rapid growth of property development companies is also creating a greater demand for Quantity Surveyors, especially with PQS backgrounds, pushing salaries higher in cost consultancies in 2019.
Requirements for professionals in the Heavy Civil space was not as high as in other areas, with limited large infrastructure projects seen in 2019, Dublin Airport and Dublin Port being the most prestigious ones. Similarly to the building sector, Civil Engineers with setting-out experience were the most sought-after professionals in the area, although salaries on the Heavy Civils side did not see as much of a rise as in the Building sectors.
In a growing digital age, with continued growth of cloud computing, social media, online retail, video streaming and the like, Ireland is capitalising on being a location of choice for many Blue-Chip Tech companies, with over 53 active data centres already in Ireland and 29 under development (predominantly in Leinster). This inward investment is providing extensive employment, especially for local M&E contractors and consultancies alike. With overall investment annually averaging €1.3 bn in Ireland alone, there is high demand for Technical professionals such as Electricians, M&E Quantity Surveyors and Electrical Engineers (with LV & MV experience especially). Furthermore, the growth of Irish M&E contractors’ operations in Scandinavia and mainland Europe working on Pharma and Data Centre projects is further drawing from Ireland’s already limited talent pool. With M&E contractors capitalising on much higher margins abroad, they are offering solid relocation packages such as 30 per cent higher salaries, flexible rotation schedules, and transport and accommodation. Despite being a positive from an employment perspective, this has created a barrier for many professionals in this space from returning to Ireland and increased the difficulty of attracting these skilled professionals back for local projects with much lower salary packages.
Pharma companies are proving to be the biggest employers for M&E contractors and consultancies outside of Leinster, with Limerick and Cork being the greatest beneficiaries regionally, with some small notable project in Galway, Donegal, and Waterford.
A major increase in the number of Water and Wastewater projects was noticed in 2018, largely a result of the Irish Water Programme capital investment worth €10 billion, forming part of the Project Ireland 2040 programme. However, it is noted that significant reliance is being placed by many Utilities contractors/Design Consultancies on the Irish water framework, with a mass redundancy by major contractors seen in October 2019. Unlike other industries, Water upgrades are occurring in all regions, and locals are benefiting from the increased employment, especially if they have previous Water experience. However, the reliance on publicly funded projects poses certain risks financially for contractors, with several delays resulting in mass redundancies in 2019. With many professional lacking Wastewater/Water experience, many professional previously confined to the capital are benefiting from the vast array of regional projects currently ongoing.
- High levels of Energy Conservation, Infrastructure, and Renewable Energy projects in 2020 are expected as a result of the climate agenda, with a further increase in demand for professionals across the Engineering spectrum expected.
- Construction activity in the residential sector will continue to grow steadily in 2020, with significant investment from both the public and private sectors in an attempt to offset the deepening housing crisis.
- The need for contract/short-term staff will continue to decrease as contractor pipelines will probably remain consistent throughout 2020, with extensive inward investment across industries in Ireland
- Irish M&E contractors will continue to dominate the Data Centre market in mainland Europe and Scandinavia, with established links to large blue-chip clients in Ireland further accelerating the awarding of such Data Centre projects outside of Ireland, resulting in further talent being drawn away from Ireland.
- Higher levels of employment are predicted outside the capital, especially in pharmaceutical and industrial developments, with notable projects such as WUXI Biologics (€325 m) in Louth, Edward Life Sciences (€160 m) in Limerick, and Intel’s €3.53 bn expansion to their Leixlip campus ramping up construction in 2020.
- Salaries will continue to rise, but the greatest changes are expected in the benefits and work arrangements, with greater levels of flexibility provided to professionals to offset their increasing remuneration requirements. Improved working conditions may also appeal to the Irish abroad looking for better work‑life balance, which was previously not an option in the construction sector.
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Our Insurance team have written this Quarterly Market Update to help keep you up to speed with what is happening within the Insurance industry, we hope you find it useful: VIEW THE INSURANCE MARKET UPDATE
Salaries have fluctuated so much within the funds sector since we published our Salary Survey at the start of the year that we have produced a revised version, we hope you find it useful: VIEW THE FUNDS MARKET UPDATE