The lack of skilled trades people could affect growth in the economy, according to the latest SME Monitor by Banking and Payments Federation Ireland.
Construction firms have reported challenges in hiring suitably trained and skilled staff, with small and medium-sized enterprises particularly affected.
A recent report published by Chambers Ireland shows that over 95% of micro-businesses in Ireland were experiencing skill gaps and a Eurobarometer survey published in September 2023 showed that 61% of SMEs in Ireland find it difficult to recruit machine operators, craft and skilled trades workers.
"The Irish economy is performing very well, we have reached our peak level of employment but what seems to be emerging is that across many SMEs, they are finding it difficult to hire certain skills, particularly machine operators and that is quite important for the construction sector," said Ali Ugur, Chief Economist with Banking and Payments Federation Ireland.
Speaking on Morning Ireland, he said SMEs are quite important in the Irish economy. "There is a dual feature in the Irish economy where there are a lot of multi-national firms, they create a lot of value added and they pay good wages.
"But most of the businesses are SMEs in Ireland and they account for around 60% of all employment, and especially in construction, SMEs account for 80% of the employment so they are mostly micro and small businesses."
In order to address the emerging gaps, the BPFI Monitor highlights the need for greater use of apprenticeship programmes and work permits.
While government has been taking measures to increase apprenticeship registrations, which are now on the rise, it will take time for these new entrants to complete their programmes.
The Monitor also highlights the use of work permits as an additional channel to fill some of the skill gaps, particularly in the construction sector.
In 2022, the Department of Trade, Enterprise and Employment issued 1,474 employment permits for roles in the construction sector, up from 608 in 2021, and there have been almost 1,000 work permits issued in the first nine months of 2023.
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Earlier this year, the Department sought submissions from sectoral representatives and employers on changes to be made to the critical skills occupational list which should help to ensure that employment permits can be granted for highly skilled occupations in key sectors which are experiencing labour or skill shortages.
Brian Hayes, Chief Executive, BPFI said: "Today's report shows that Ireland's economy remains buoyant as economic activity continued to grow in 2023, even as the economy coped with sharp rises in business costs and consumer prices and the European Central Bank's efforts to ensure price stability through interest rate increases.
Employment reached its highest levels on record in Q2 2023 at over 2.6 million and on the back of this, income tax receipts were up 8.2% year on year to €23.1 billion in the year to date," he said.
"However, despite strong indicators in the economy, it’s clear that labour shortages risk growth in key SME sectors, particularly construction, where SMEs account of 80% of employment.
"Government efforts through apprenticeship schemes and work permit programmes will be key in addressing emerging gaps and we are starting to see some of the results of these efforts to date. Apprenticeships in the construction and electrical sectors accounted for nearly 60% of all registrations in 2022 and almost all roles in the construction sector are now eligible for employment permits.
"It will be important to leverage every available source for new skills and new workers for key sectors to maintain the positive recent momentum."
