Rising Oil Prices & Construction Costs: Ireland Q1 2024 Outlook

Irish Construction Sector Faces Renewed Cost Pressures Amidst Global Volatility

The Irish construction sector is bracing for further cost increases, fueled by surging oil prices and ongoing supply chain challenges. The Construction Industry Federation (CIF) has warned that the recent escalation in geopolitical tensions is injecting renewed volatility into global markets, impacting the cost of materials and fuel – a critical component of project viability.

According to the CIF’s Q1 2026 Outlook Survey, conducted between January 30th and February 24th, 79% of construction companies reported a year-on-year increase in raw material costs during the fourth quarter of 2025. A significant 77% anticipate these increases will continue through the first quarter of 2026. These findings predate the recent surge in oil prices following the escalation of conflict in the Middle East, suggesting the situation could worsen.

“The scale and speed of the oil price spikes since the outbreak of war on 28 February are deeply alarming for the industry,” stated Andrew Brownlee, Chief Executive of the CIF. He emphasized that fuel is not merely a logistical expense, but “underpins the manufacture and transport of construction materials and is a fundamental day to day business cost.” As a small island nation, Ireland is particularly vulnerable to fluctuations in global fuel prices due to its reliance on transportation and logistics.

The concerns extend beyond material costs. The survey also revealed a growing hesitancy among construction firms to engage with Public Works Contracts. 73% reported limited or no involvement in public projects during the fourth quarter of 2025, and 71% expect similar levels of limited engagement in the first quarter of 2026. This “wait-and-see” approach is attributed to administrative burdens, bureaucratic hurdles, and perceived low profit margins associated with public sector work.

Despite these challenges, a small percentage – 19% – of companies anticipate increased involvement in Public Works Contracts over the next 12 months. However, those anticipating reduced involvement cite the administrative complexities as a primary deterrent. The CIF argues that while government initiatives like Delivering Homes, Building Communities 2025–2030 and the Action Plan on Accelerating Infrastructure demonstrate intent, structural barriers continue to impede progress.

Brownlee pinpointed planning delays, legal challenges, and infrastructure deficits as the primary constraints on project delivery, rather than labor or skills shortages. He stressed the need for a clear and predictable pipeline of projects linked to the €102.4 billion National Development Plan (NDP) allocation for 2026-2030 to provide businesses with certainty and discourage them from seeking opportunities in international markets.

“To maintain business certainty and prevent firms from pivoting to international markets, the industry requires clear, traceable project pipelines for the €102.4bn NDP allocation (2026–2030),” Brownlee said. The CIF intends to focus on driving competitiveness and productivity to ensure the successful completion of projects funded by this record investment.

On a more positive note, the survey indicated continued employment growth within the construction sector, particularly among larger firms, with broad-based growth anticipated for the first quarter of 2026. This suggests that despite the cost pressures and administrative hurdles, the sector remains active and is expanding its workforce.

Looking ahead, the CIF emphasizes the importance of careful cost management and ongoing monitoring of supply chain pressures. Industry stakeholders will be closely watching developments in the Middle East and their impact on global oil prices, as well as advocating for streamlined processes and increased clarity regarding public sector projects. The ability of the Irish construction sector to navigate these challenges will be crucial to sustaining growth and delivering on ambitious infrastructure plans.