Ireland’s Infrastructure Crisis

The IFAC report casts a critical light on the government’s approach to resolving Ireland’s ongoing housing and infrastructure supply crisis. This report’s findings underscore the persistent shortfalls and the substantial challenges that hinder the nation’s progress towards a solution. In particular, it points to an alarming reality: the notion of a short or medium-term resolution is virtually out of reach without serious shifts in policy and approach.

Since 2022, the government has displayed a pattern of disregarding IFAC’s cautionary data and recommendations, even as these are built on a robust evidential foundation. This tendency to dismiss IFAC’s guidance is surprising, given that council members are appointed based on their independence, experience, and expertise in macroeconomic and fiscal issues, as outlined in the Fiscal Responsibility Act of 2012.

Ahead of Budget 2025, the IFAC issued a stark warning to the government. It cautioned that pushing a substantial budget package could exacerbate existing pressures on an already fully-employed economy, increase inflation, and ultimately widen the underlying fiscal deficit. This move, IFAC argues, would further embed Ireland in the kind of boom-bust economic cycle that has plagued the country in the past. Ignoring this warning, the government not only greenlit a large spending increase but also breached its own fiscal guidelines, adding approximately €1,000 annually to a typical household’s cost of living, though this may well be an understatement.

With the likelihood that a similar government composition will continue after the next election, hopes are dim that the IFAC’s cautionary insights on the scale of Ireland’s infrastructure crisis will be heeded. The IFAC’s working paper details a series of pressing challenges, including chronic deficits in housing and critical infrastructure. Although the Irish economy has demonstrated notable resilience in the face of global disruptions like the COVID-19 pandemic and wars in Ukraine and the Middle East, its current trajectory is unsustainable. The economy is straining against capacity constraints, which have driven inflation in the domestic services sector to uncomfortable heights.

One of the primary focal points of the IFAC’s recommendations is Ireland’s comparatively low infrastructure stock. Although some progress has been made since the 1990s, the nation’s infrastructure remains 25% lower than the average for high-income European countries. Addressing this gap requires tackling capacity issues within the construction sector, which currently lacks the workforce needed to meet demand. According to IFAC, this would necessitate an additional 80,000 workers. Alternatively, Ireland’s construction sector could focus on productivity enhancements, reducing the need to about 20,000 extra workers. However, achieving such productivity gains is no small task. The construction sector in Ireland has struggled with stagnant productivity levels, partially a legacy of the country’s boom-bust economic history, exacerbated by fiscal policies that have tended toward procyclicality.

The scale of Ireland’s construction labour shortfall is immense. At the end of 2023, new registrations on construction-related programs, both traditional and apprenticeship-based, numbered only 4,946 and 848, respectively. This marks only a 3% increase over the previous year’s figures. Despite this incremental growth, the government remains optimistic, frequently touting the expansion of education and training pipelines for construction careers. Various parliamentary discussions highlight that annual enrolments in construction apprenticeships have increased steadily in recent years. Nonetheless, whether this growth is sufficient to tackle the burgeoning infrastructure crisis is doubtful.

A report from the Technological University of the Shannon starkly underscores the scale of the issue, projecting that by 2030, Ireland will require 284,000 additional or reskilled construction workers. This projection includes 120,000 new hires and the retraining of 164,000 existing workers. The report raises alarm about the current gaps in skill supply, noting that while construction course enrolments are gradually increasing, they remain low relative to demand. Further, the shortage of apprenticeships, especially in critical trades like plumbing and carpentry, poses a severe obstacle. Shortages are also acute in engineering, with estimates indicating a 30-40% deficit across fields such as electrical, structural, civil, and energy engineering, as well as quantity surveying.

Adding to the challenge, IFAC’s working paper notes that unemployment rates within the construction sector are already low, indicating limited domestic sources for new labour. Filling these gaps would thus require a combination of reallocation from other sectors, increased apprenticeship programs, and potentially, inward migration. However, recruiting foreign construction workers brings its own set of complications. Increasing inward migration to bolster the construction workforce, while theoretically feasible, may contribute to additional infrastructure and housing demand, albeit potentially in a temporary capacity.

The IFAC report suggests that attracting construction workers from outside the EU could be a viable, albeit limited, solution. In 2023, for instance, 31,000 work permits were issued across all sectors, with less than 1,400 allocated for the construction industry—under 5% of the total. This narrow pipeline underscores the need for broader policy interventions if Ireland aims to meet its workforce requirements without fuelling further infrastructure strain.

Compounding the difficulty, factors outside the government’s control may impact workforce availability. Denis Naughten, an Independent TD, has pointed to the lingering impacts of the financial crisis, which drove many construction workers abroad. These workers are hesitant to return to Ireland, where they perceive the industry as plagued by cycles of employment instability. Additionally, labour markets in Eastern and Central Europe—historically, major sources of Irish construction labour—have strengthened in recent years, making Ireland a comparatively less attractive option for workers from these regions. A 2019 survey conducted by TU Dublin and the Construction Industry Federation (CIF) revealed that 86% of Irish construction firms were grappling with recruitment challenges due to a lack of qualified tradespeople.

To address these recruitment hurdles, Naughten advocates for a dual approach: secure, long-term employment opportunities and a more resilient construction workforce. Such measures, he suggests, could also act as incentives for Irish construction workers currently employed abroad to consider returning home.

In sum, Ireland’s infrastructure shortfalls represent a systemic issue that extends well beyond the housing crisis. The failure to meet growing infrastructure demands could become a persistent political flashpoint for years to come. The government’s optimistic rhetoric, although hopeful, fails to reflect the on-the-ground realities that the IFAC report highlights. Addressing these challenges requires more than optimism; it calls for a coordinated, long-term approach that not only attracts but retains a skilled workforce, reformulates fiscal policy to avoid procyclical pitfalls, and fundamentally recalibrates Ireland’s capacity to meet its infrastructure demands. Without these critical adjustments, the cyclical nature of Ireland’s infrastructure deficiencies seems destined to continue as a recurring theme in the nation’s political and economic landscape.