Northern Ireland construction broadly static with a quarter of firms in survival mode
Only about a quarter of Northern Ireland’s construction companies are operating at full capacity, while a fifth are operating at half capacity or less, according to the latest State of Trade survey from the Construction Employers’ Federation (CEF) and PwC.
The latest CEF assessment for the final three months (Q4) of 2015 shows that a quarter (25%) of companies were still operating in survival mode, a worsening of the situation compared to Q4 2014 when 20% of companies put survival as their business priority.
The survey says that fewer than a third (32%) of CEF members surveyed anticipated growth in 2016, only slightly up on the 29% planning for growth in the final quarter of 2014.
While around 31% of companies reported increased workload in Q4 2015, only 18% said they were increasing workforce numbers, well down on the 24% of firms who were planning to increase employee numbers during the first three months (Q1) of 2015.
Companies are also continuing to look beyond Northern Ireland for profitability and growth.
Commenting on the survey results CEF Managing Director John Armstrong said the industry continued to face serious challenges:
“This is another mixed bag of survey data. Only a third of members anticipate growth, with more than a quarter expecting the economic environment to get worse.
“In addition, during 2015 the proportion of firms working at about full capacity increased but so did the proportion working at half capacity or even less.
“Our survey findings reflect the official NISRA data which suggest that across most of the sector employment growth was concentrated at the start of 2015, with growth broadly flat thereafter. Although output also grew through to mid-2015, it also declined in the third quarter according to the NISRA data.
“This is an industry that generates high wages, significant levels of gross value added and extensive downstream investment and job creation, but it relies on developer confidence and public sector investment.
“It’s worrying that we are seeing no real indication of either profitable growth or sustainable job creation.”
The CEF data suggest that the extent of working outside of Northern Ireland- principally in GB and the Republic of Ireland (RoI) - peaked in the first quarter of 2014 when CEF members reported around 24% of activity in GB and RoI. However, external contracting declined to 13% in Q4 2014 and has shown only a modest increase to 16% in the final quarter of 2015.
When members were asked whether they expected economic conditions to improve, the proportion of optimists only marginally outweighed that of pessimists. At the end of Q4 2015, 31% expected the economy to improve with 27% expecting things to worsen, while 34% expected no change. It may also be significant that the percentage of “don’t knows” has grown; from 2.5% in Q1 2015 to 8.5% at the end of 2015.
Oliver McAllister, PwC director and construction and real estate leader, says the latest CEF survey supports the wider contention that recovery may be losing momentum:
“Overall, the UK economy has been recovering well with solid job creation and infrastructure investment increasing in London and the GB regions.
“This is not being reflected in Northern Ireland and, despite NISRA indicating an increase in output in the year to Q2 2015, this has not been sustained. Indeed we have seen a decline in output of just over 2% in the following three months.
“Anecdotally, there appears to be uncertainty around the availability of commercial finance, concerns over the cost and availability of development land and little progress in modernising planning regulations.
“Factor in a lack of public sector investment in previously planned infrastructure programmes and we have an industry that is operating well below full capacity, with larger firms still looking beyond Northern Ireland for capacity, profitability and growth.”