Ireland’s construction industry remains in crisis after the biggest contraction in a year according to a new index.

Ulster Bank has reported that its latest index of construction suggests that the building sector in Ireland contracted at the fastest pace in more than year.

Evidence that the housing slump is worse than ever is clear in the Ulster Bank survey which suggests the index of construction fell to 40.5 in June, down from 41.1 in May.

This represents the sharpest decline in 12 months with any index other than 50 per cent regarded as a contraction.

House prices in Ireland have slumped 40 per cent since the boom highs of 2007.

The collapse of the Celtic Tiger, and the almost non-existent credit for builders and buyers from the banking sector, have contributed to the worst recession in Ireland’s economic history.

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Government figures now suggest that there are about 2,800 unfinished developments - or ghost estates – in Ireland.

Ulster Bank economist Simon Barry is unable to predict a quick fix for the building sector.

“As we look to the second half of the year, near-term prospects for the sector as a whole don’t look too bright,” said Barry, chief economist with the bank.

“Activity levels have now fallen in every month since June of 2007, meaning that the construction slump has now entered its fifth year.”

The report also states that the measure of residential construction rose to 41 in June from 37.6 in May, while commercial building climbed to 42.3 from 41.9. The index for civil engineering fell to 32.8 from 37.4.