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Why are construction start-ups outpacing other sectors?

New company formation is outstripping all other sectors, with retail at the other end of the scale.

View a larger version of this chart here

EARLIER THIS WEEK, TheJournal.ie reported that the rate of construction start-ups is up by almost 40% compared to the first six months of last year.

As can be seen from the chart above, the rate of growth in companies being founded in the sector is far outpacing the sectors that are seeing the lowest levels of company foundation.

But why?

We asked Vision-net, who publish the statistics based on company registrations, what marked construction apart from other sectors.

Managing director Christine Cullen said that in large part is driven not by how vibrant the sector is, but by how far it has fallen.

“The sector is starting from a low base” she explained.

“Growth in the sector comes following a prolonged period of downturn. Over the past number years the trend was for construction companies to go under rather than for new firms to be established.”

Apart from that, Cullen picked out increased bank lending and a view that property price falls are at an end as factors driving the establishment of more construction companies – this is also driving a pick-up in the number of real estate start-ups, which is up by 31.8% overall.

Retail woes

Cullen said that the one sector that is truly struggling is wholesale and retail, where the number of new start-ups has fallen by 0.1%.

“This would appear to signal that consumers are still weary of spending and confidence has yet to return to this area of the economy.”

Consumers’ willingness to spend will not have been helped by the introduction of the property tax and the prospect of water charges later this year.

Looking to the future, however, she pointed to an increase in spending on big-ticket items like cars which may trickle down to smaller items in the retail sector.

Read: Moving on up – Construction start-ups rise by almost 40%>

Read: Asking prices up nationally for first time since peak of property boom>

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