The Irish construction sector is bracing for further cost increases as surging oil prices add to existing inflationary pressures, according to a new report. The Construction Industry Federation (CIF) has warned that the recent spike in fuel costs, exacerbated by geopolitical instability, is “deeply alarming” and threatens project viability across the country. This comes as the industry already grapples with rising raw material costs and administrative hurdles related to public works contracts.
The concerns stem from the CIF’s Q1 2026 Outlook Survey, conducted between January 30th and February 24th, 2024 – prior to the significant escalation of conflict in the Middle East and the subsequent jump in oil prices. Even then, the survey revealed that 79% of construction companies had experienced a year-on-year increase in raw material costs during the final quarter of 2023. A substantial 77% anticipated that this trend would continue through the first three months of 2024. The current situation, with oil prices continuing to fluctuate, is expected to intensify these challenges.
Fuel is a particularly critical concern for the construction industry, as it’s integral to nearly every stage of a project. “It underpins the manufacture and transport of construction materials and is a fundamental day to day business cost,” explained Andrew Brownlee, Chief Executive of the CIF. Given Ireland’s status as an island nation, transportation and logistics represent a significant portion of overall material costs, making the sector particularly vulnerable to external shocks like the recent oil price increases. According to data from the Central Statistics Office (CSO), transport costs in Ireland have been steadily rising, contributing to overall inflation in the construction sector. CSO data shows a consistent increase in transport costs over the past year.
Rising Fuel Costs and Project Viability
The speed and scale of the oil price increases since February 28th are what particularly worry industry leaders. Brownlee emphasized that the sector was already operating in an environment of “significant cost inflation” before the latest geopolitical developments. The CIF is now urging careful cost management and close monitoring of supply chain pressures to navigate the current volatility. The impact isn’t limited to material costs; it extends to project delivery timelines, contract management, and the overall pipeline of work.
The impact of higher fuel prices isn’t uniform across all construction projects. Larger, more complex projects with longer timelines are likely to be more significantly affected, as they require greater volumes of materials and more extensive transportation. Smaller projects, while still impacted, may have more flexibility to absorb some of the increased costs. However, even smaller contractors are feeling the pinch, with many reporting difficulty securing competitive quotes for fuel and transportation services.
A ‘Wait-and-Spot’ Approach to Public Works
Compounding the challenges posed by rising fuel costs is a growing reluctance among construction companies to engage with Public Works Contracts. The CIF’s Q1 2026 Outlook Survey revealed that 73% of companies reported limited or no involvement in public projects during the fourth quarter of 2023, with 71% expecting a similar level of disengagement in the first quarter of 2026. This “deepening ‘wait-and-see’ approach” is attributed to administrative burdens, bureaucratic processes, and the often-slim profit margins associated with public contracts.
Despite these concerns, 19% of companies anticipate increased involvement in Public Works Contracts over the next 12 months. However, those anticipating reduced involvement cite the administrative overhead as a primary deterrent. The CIF argues that while initiatives like Delivering Homes, Building Communities 2025–2030 and the Action Plan on Accelerating Infrastructure demonstrate the government’s intent, “structural barriers remain.” Brownlee stated that the primary constraints on project delivery aren’t related to labor or skills shortages, but rather to planning delays, legal challenges, and deficiencies in existing infrastructure.
The Necessitate for a Clear Project Pipeline
To foster greater certainty and prevent companies from seeking opportunities in international markets, the CIF is calling for a clear and traceable project pipeline for the €102.4 billion National Development Plan (NDP) allocation for 2026–2030. The NDP, a long-term investment strategy for Ireland, aims to improve infrastructure and public services. The National Development Plan outlines significant investment in areas like transport, housing, and healthcare.
The CIF believes that a transparent and predictable pipeline of projects will encourage greater participation from construction companies and help to mitigate the risks associated with fluctuating costs and administrative delays. The organization remains focused on driving competitiveness and productivity within the industry to ensure that this record level of investment translates into completed projects.
Interestingly, the survey also indicated positive trends in employment within the construction sector. Employment levels rose in the fourth quarter of 2023, particularly among larger firms, and broad-based growth is anticipated in the first quarter of 2026. This suggests that despite the challenges, the industry remains optimistic about its long-term prospects.
Looking ahead, the construction industry will be closely monitoring global oil markets and the evolving geopolitical landscape. The CIF is advocating for proactive measures to mitigate the impact of rising fuel costs and streamline the process for engaging with public works projects. The next key checkpoint will be the release of updated inflation figures by the CSO in May, which will provide a clearer picture of the ongoing cost pressures facing the sector.
What are your thoughts on the challenges facing the Irish construction industry? Share your comments below and let us know how these rising costs are impacting your projects or communities.
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