One of the less celebrated Irish successes of the last 20 years or so is the development of a deep pool of companies that have world-class expertise in the design and construction of data centres.
The secretive nature of the data centre industry means these firms tend not to seek publicity – and they didn’t really need it. Many of them grew by following their original clients – often US multinationals – into Europe and elsewhere to build data centres.
They are now significant exporters in their own right. According to the Construction Industry Federation almost one in five large construction companies, with more than €9 million in turnover, exported construction services in the last 12 months. Data centres, pharma plants and energy generation were the most common projects.
The same survey, published in November, found that 75 per cent of construction firms identified access to skilled labour as the biggest challenge they faced. Two thirds said labour costs were increasing, and profit margins were under pressure. We can presume firms involved in data centre construction are among them.
Under the circumstances then it is perhaps not a big surprise that the sector is being investigated by the European Commission for anticompetitive labour practices. It emerged at the start of December that Sisk’s offices in Citywest had been raided in November. The company – which recently won a contract to build a €1 billion data centre in west Dublin for US group Vantage Data Centres – said it was “fully co-operating with the European Commission and the Competition and Consumer Protection Commission”.
Just before Christmas the news broke that the offices of Jones Engineering had also been raided. Jones is one of the better-known Irish firms in this area. More than half of its €1 billion-plus revenues come from operations outside Ireland, including the Netherlands, Belgium, Denmark, Germany and Sweden. The 132-year-old company was bought by Cathexis Holding, a US conglomerate, for more than €1 billion in 2022.
Sisk and Jones are two of the higher profile players in a sector that does not look for publicity, but they are far from the only ones. A quick scout of Google will throw up a long list of well known and not so well known Irish firms promoting their experience and expertise in the area. It would seem very likely that many of them have also had a knock on the door in the last few weeks.
The European Commission is investigating whether companies in the data centre construction sector have broken EU competition laws that prohibit cartels and restrictive business practices. They are focusing on possible collusion in the form of no-poach agreements; this is, when competitors agree not to recruit employees from each other in order to keep wages down. No-poach agreements also hinder labour mobility, which in the longer run reduces productivity and innovation – and, as a result, competition lawyers and economists are not fans.
[ Jones Engineering named in European Union data centre investigationOpens in new window ]
The commission has not said how long the investigation will take or whether it is confined to Ireland, which seems unlikely. It also makes it clear that carrying out inspections “does not mean that the companies are guilty of anticompetitive behaviour, nor does it prejudge the outcome of the investigation itself”.
It is possible that the investigation will come to nothing. If it doesn’t there will be fines, sanctions and reputational damage for the companies involved.
[ Q&A: Why is the European Commission investigating data centre construction?Opens in new window ]
If this is how it ends up and Irish firms turn out to be centrally involved then it will be tempting to moralise about how, once again, Irish business has shot itself in the foot through greed. The ambivalence towards regulation and taxation that was once endemic in the Irish construction sector has once again reared its ugly head, and so on.
This level of national self-flagellation would probably be overdoing it. The Irish construction sector is unlikely to turn out to be any more morally fallible than its European counterparts.
There is a potential for real damage in terms of relationships with big clients for any companies found to have broken competition law. Paradoxically, the clients might actually have benefited from efforts to keep wages down provided the savings were not all trousered by the construction companies.
But they would be foolish not to ask themselves what the read for them is in terms of what it says about the mindset of the people building their data centres.
These are, however, issues for the future. Right now, the takeaway is that Ireland has – perhaps more by accident than design – achieved a leading position in a sector that could grow exponentially if the demand for data centres being driven by the hype around AI turns out to be sustained. Helping it resolve its shortage of skilled workers should be a priority for any government serious about weaning the country off four or five big corporate taxpayers.
