Posted on Monday 28 May 2018 by Ulster Business

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Two decades on from the Good Friday Agreement, John Armstrong, managing director of the Construction Employers Federation looks at how the industry is performing with a lack of government

Throughout the last 20 years, the NI construction industry has sought to make its impact in this change – both by the number of people the industry has engaged and by the development work that has been completed to enhance our competitiveness and attractiveness as a region to do business and invest in.

While Northern Ireland’s future – and indeed that of local contractors, their employees and their supply chains – can undoubtedly be positive, we face a series of challenges over the months and years ahead – challenges that were clear in our latest State of Trade survey with BDO Northern Ireland, covering the second half of 2017 and the industry’s prospects for 2018.

The key survey findings included:

  • During the second half of 2017 just under half of firms worked at full or almost full capacity
  • This was down on the first six months of 2017 when two-thirds of companies worked at full or almost full capacity
  • Costs were up across the board for firms
  • Looking at work expectations locally over the next 12 months, around two-thirds of firms expect it to level out or decline
  • Only a small number of firms see the next 12 months as being about survival – a third are focused on stability, a quarter on growth and a third on increasing profitability
  • Firms are though much more positive about the next 12 months outside of Northern Ireland in terms of work expectations
  • Taking these factors into account, the sector’s outlook is flat in terms of employment growth
  • The industry is clear that the failure to restore the Northern Ireland Executive is a clear impediment to its sustainability and growth. This has had, and will continue to have, a major impact on tenders coming to market
  • Additionally, while industry has welcomed the extra clarity on Brexit provided by December’s UK-EU deal, there is significant uncertainty as to what companies should be preparing for in terms of the final outcome

While workloads have remained positive and the vast majority of the industry is beyond purely focusing on its own survival, the year-long political deadlock at Stormont has clearly begun to feed through. With fewer than 50 public sector construction projects currently out to tender, less than half the amount in October, the industry is fast approaching a dead end in terms of its public sector workload.

With little political direction beyond the Executive’s flagship schemes, it is impossible for future infrastructure planning across government clients to, properly, take place.

The Department of Finance’s Budget Outlook very clearly details the challenges presented because of the huge investment going into the Northern Ireland Executive’s flagship projects over the next three years even though the overall capital budget is going up.

Unquestionably, the Executive’s flagship schemes stand on their very clear economic merits. However, a balance must be struck in budgetary planning between how much resource is spent on these and other areas so to avoid a massive cliff edge for the vast majority of firms not engaged on the flagship projects.

With a 2018/19 Northern Ireland Budget now progressing through Westminster, we now need urgent clarity on how the funds allocated by the Secretary of State are to be spent by the various Government departments. In this context it is therefore very welcome to see the Department for Infrastructure announce its highest start of year funding for roads maintenance – £75m – since 2011.

This will come as a massive boost for those contractors, their employees and supply chains, to which road maintenance is a significant part of their workload.

The industry has faced a challenging period in respect of its sustainability. From issues related to low margins on works, to insufficient pipelines of activity, to the current political and budgetary challenges within Northern Ireland, there are significant tests to be dealt with.

These must be matters of concern to anyone who wishes to see a healthy and vibrant Northern Irish construction industry given its critical role in delivering jobs, economic development and growth.

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