Governmental failures in infrastructural investment

I don’t want to seem overly pessimistic, writes Colm McGrath, Managing Director of Surety Bonds. A number of multinational IT and fund management companies continue to see Ireland as a hub for their European operations and have invested accordingly, but the missing piece is investment in infrastructure.

To add to this positivity, the construction industry is continuing to expand due to expenditure on foreign direct investment projects and by continued activity in the commercial office sector. The residential sector is catching up, the required volume of 36,000 units per annum are far from being met with around 24,000 units to be completed in 2022, there is still massive scope for growth. The missing piece of the jigsaw is investment in infrastructure, there is huge scope for projects in civil engineering, which is currently posting the weakest activity of all construction sectors.

The Irish Government is completely in control of its own investment decisions and is at fault when it comes to the lack of investment in infrastructure in Ireland. To support Ireland’s, not just Dublin’s, long-term growth lies firmly on the shoulders of this government.

The National Planning Framework 2040, with a potential spend of €116 billion, and the newly unveiled plans to pump €165 billion into infrastructure by 2030 should put some certainty back into the construction and the civil engineering market for the long-term but it won’t due to the boom-and-bust cyclical nature of our governmental policies which are clearly outlined in this wish list, it’s certainly not a defined plan that would give me long-term comfort.

From a governmental point of view investment in infrastructure has a high rate of return, Ibec estimates that all road improvements carried out between 2006 and 2010 led to an annual beneficial contribution in GDP of €525 million and, in present value terms, over a 30-year period this would equate to €9.5 billion. If the Government was to address many of the road projects listed in the 2040 NPF, then not only would that alleviate congestion, but it would encourage investment in other regions and give the State a decent return on that investment over a 10-to-20-year period.

Infrastructure lasts lifetimes and while interest rates on government borrowing are at an all-time low it seems like a no brainer to make a decision to invest in Ireland’s future now, not continuously kick the can down the road as successive governments have done.

T: +353 868 189 702
E: colm@suretybonds.ie
W: www.suretybonds.ie