76 percent of construction companies have come across black economy operations in the last 3 months. In a new Construction Industry Federation (CIF) survey on the black economy in the sector, 85 percent of construction companies have also come across an increased number of black economy operations in the lat 12 months.
Some other key statistics detailed in the survey include:
Almost 20 percent of construction companies believe that black economy activity in the construction sector has grown by more than 100 percent since the downturn began.
52 percent of construction companies believe they have lost more than 5 jobs to black economy operations in the last 12 months.
Just under one in four construction companies are aware of public contracts being awarded to black economy operations. 98.5 percent of construction companies believe black economy operators pay their workers with cash outside of the tax system.
65 percent believe that wage rates offered to construction workers in black economy operations are undercut by more than 20 percent.
Almost one in two construction companies have come across clients who have experienced problems with black economy operators or the work they have carried out and 39 percent have been asked to repair work carried out by a black economy construction operative.
56 percent believe that the materials used by black economy operators are lower in quality.
93 percent believe the Government needs to take stronger action to regulate black economy operators in the construction industry while 74 percent believe the Revenue Commissioners should be responsible for ensuring regulations to combat the black economy are enforced.
Commenting on the survey, CIF Director General Tom Parlon said, “For some time now it has been evident that there is a major problem with black economy activity in the construction sector. Legitimate construction operatives who obey their tax obligations and comply with the various regulations in the industry are finding it more difficult to win work. The fact is that they are being undercut by black economy operators when it comes to tendering.
“The black economy operators are able to do this because they are not paying tax, they are not providing their workers with the mandated wages and pensions, they are using lower quality materials and they are not abiding by the various regulations and safety standards set for the construction industry. With so little work in the construction sector at present that is making life very difficult for those legitimate operators. Many have been forced out of business over the past couple of years and the black economy operatives are making that problem worse.
“This is not just an issue for those in the construction sector. These companies regularly avoid tax, which reduces the payments to the Exchequer. That impacts on everyone in the country. Additionally in some cases these construction operatives may be claiming Jobseekers Allowance at the same time as they are doing this construction work on the side. They then use that dole payment to help subsidize their work, allowing them to offer lower rates.
“However lower rates do not mean the construction work is of the same quality. CIF members have come across countless jobs done by black economy operators which had to be repaired or were done in a haphazard fashion. In many cases poor quality materials were used and the work done did not meet the requirements of the client whatsoever.
“There are also real concerns about the safety standards implemented by these black economy operatives. Safe construction work costs money and in a lot of cases black economy operatives are cutting the corners when it comes to maintaining a safe construction environment. That is putting their workers and the client themselves in danger. It should be remembered that clients can be held responsible for any accidents or problems caused by the construction work they have done. So in the event of an accident occurring they may be sued rather than the black economy construction operative.
“We hope by providing these survey details we will be able to help create greater awareness of this problem and that this will lead to more measures being introduced to tackle the black economy in the construction industry. There is particular responsibility on the Government, the various local authorities and state agencies. These bodies are responsible for the majority of the construction work that is taking place at the moment and they must lead by example on this issue.
“Under the terms of the REA all those participating in public contracts have to be compliant with the various construction regulations, provide the proper wages and pensions to their workers and pay their taxes. Unfortunately this is not always happening and it is an issue that the Government has to get to grips with if they want to stop the black economy thriving,” Mr. Parlon concluded.
The CIF has also put together some advice for helping individuals, householders and businesses to avoid black economy operatives. These simple steps will allow the client to ascertain if they are dealing with a black economy operative. The steps to follow are:
- Ask for a contract
- Ask for a VAT number
- Check if they have a C2 certificate
- Ask about where the construction materials came from
- Ask if they have certified health and safety standards
- Check if they have insurance
- Ask if they are members of the CIF