Challenges facing construction industry call for ambitious agenda from next Executive

The Construction Employers Federation has today published its Manifesto for the 2022 NI Assembly Election while also unveiling the results of our State of Trade Survey for the second half of 2021.

The CEF Manifesto can be read here

The survey, which represents responses from companies with a combined turnover of over £1 billion per annum, had the following key findings:

  • On material shortages, 11% said it was having a critical impact on future sustainability of their business, 47% said it was having a serious impact causing delays in project delivery/commencement, 36% said moderate impact 
  • On rising costs, 27% said this the impact was critical leading to a risk to their business, 46% said it was having a serious impact causing financial concern, 23% said impact was moderate 
  • Of those who have engaged with government on the Executive’s Procurement Advisory Note (PAN) on material shortages and costs increases published last August: 42% said government clients have still not engaged on potential claims, 38% said clients had only properly engaged since detailed CPD guidance was published in November, only 20% reported good engagement 
  • Main reason for delay in settling claims under the PAN: 32% of respondents said government clients had said lack of budget, 29% said lack of detailed guidance, 21% said their clients had said that contractors didn’t need supported, 18% said clients were unsure if the PAN applied to them
  • On inclusion of inflationary clauses in future government contracts where they had previously not existed: 50% said inclusion was essential for tendering, 29% said more likely to tender if included
  • On business prospects for the 12 months ahead: 40% of respondents said stabilising output/consolidating their business, 25% said growth, 21% said increase profitability, 13% said survive

Commenting on the results, CEF Managing Director Mark Spence said:

“These results continue to reflect a period of immense challenge for many of our local construction firms. Concerningly, the findings and wider market forecasts detail the clear view that this unprecedented period shows little sign of abating. 

“While the Northern Ireland Executive has taken positive steps to help those contractors that are engaged on public works, much of this has yet to translate into actual financial assistance. Additionally, with it understood that such assistance doesn’t come close to addressing all the cost increases of the last 18 months, it is undoubted that much public work is being delivered at a loss to contractors and we have yet to see the full impact on the medium to long-term sustainability of many firms.

“When we add to this the downturn in the commercial market which is only beginning to recover, the infrastructure deficit which is stalling an ever-growing demand for housebuilding activity and the lack of clarity around public sector pipelines due to uncertain budgets, the sector remains one which is constrained from achieving its full potential”. 

Given this backdrop, and as we move towards May’s Assembly Election in the context of the need for a sustainable recovery from the Covid-19 pandemic which helps stimulate and grow the local construction sector, we have laid out the sector’s key asks of the next Executive. 

At a high level this must include:

  • Greater consistency in procurement practice across the public sector accompanied by the establishment of a Procurement Review Service which seeks to avoid costly and time-consuming legal challenges
  • Agreement of a multi-year capital budget that delivers key projects such as the remaining Executive Flagships, the York Street Interchange and the A1 Junctions as well as an absolute commitment to funding NI Water’s infrastructure programme over the coming decade
  • The establishment of an independent Infrastructure Commission as well as delivering fundamental reforms to the governance and financing structure of the Housing Executive and NI Water
  • Substantive changes, by way of a new Planning Act, to our two-tier planning system which seek to drastically speed up decision making processes
  • Set an ambitious target of completing a minimum of 9,500 new homes for each of the next 15 years in order to meet our housing need
  • A significant package of measures to enable the drive to net zero that must include a funded and ambitious housing retrofit strategy

Mr Spence concluded:

“We believe that the delivery of this ambitious agenda can help underpin our sector’s recovery from both the challenges of the pandemic and the unprecedented nature of the materials shortages and price increases of the last 18 months. 

“The next Executive must take significant steps, many of which require fundamental reform of existing structures, to build confidence in the industry and ensure that the construction sector can play its part in meeting the challenges that our society faces. 

“Crucially, whoever makes up the next Executive must ensure that the coming mandate has political stability at its core. Since the restoration of devolution in 2007, we have been plagued by 15 years of stop-start, largely ineffectual government which has ducked many of the systemic issues that repeatedly present themselves. The next Executive cannot be a repeat of what has gone before”.