Political derogation of responsibility starting to cripple local construction industry, say firms

Over two years since the collapse of the Northern Ireland Executive, local construction firms have clearly identified its absence as the major contributory factor towards their inability to grow and meet their job-creating potential. This is the key headline from the latest State of Trade Survey, for the second half of 2018, conducted by the Construction Employers Federation.

The survey took the opinions of 80 Northern Ireland headquartered construction firms who were, collectively, responsible for turnover of approximately £950 million during 2018.

Key findings within the survey were:

  • Only 2% of those surveyed see the construction market in Northern Ireland getting ‘a little better’ during 2019. None saw it getting ‘a lot better’. 70% of respondents see it either staying the same or getting worse (35% each)
  • Outside of Northern Ireland, 28% see the construction market improving over 2019, but 45% see it staying the same or getting worse
  • As a direct consequence of the political impasse in Northern Ireland, 56% of respondents have put off growing their workforce
  • If the situation is not resolved in the next 3-6 months, 36% of respondents said they will make redundancies
  • 80% of respondents said the lack of an Executive had led, directly, to a reduction in the number of projects coming to the market
  • Indeed, 45% said the impasse had forced them to further shift their focus for new work outside of Northern Ireland
  • 75% of companies said that only with the restoration of the Executive could the industry achieve its growth potential
  • This being said, 75% of those surveyed worked at either full or almost full capacity in last six months of 2018
  • 42% of respondents said that profit margins were worse than this time last year. A further 35% said they were the same
  • 83% had seen a substantial rise in labour and material costs over 2018. Two-thirds had seen similar rises in plant costs
  • 30% of respondents do however have company growth as their main priority in 2019 – this is set against 20% who see survival as their main priority
  • Half of respondents said that a lack of finance in the sector was an additional factor in holding back growth
  • Only 25% of companies said they had started Brexit-related preparations
  • Just shy of 40% of respondents said that the time taken to get planning permission for projects had got worse during 2018

Commenting on the survey results, Federation Managing Director John Armstrong said:

“Not since the deepest point of the recession a decade ago has our State of Trade survey painted such a stark picture with respect to the concerns of the local construction industry.

“Two years of political intransigence has had the well-publicised effect of holding up public sector works, from values in the hundreds of millions to the tens of thousands, which have, as each month has passed, exacerbated the growth and employment-limiting issues that companies are facing.

“Undoubtedly, the clarifying legislation with respect to senior civil servants powers, which was enacted at Westminster last autumn, is beginning to have an effect with respect to the progression of a number of stalled projects. However that legislation can and only be a stop-gap measure. Without critically vital political accountability the industry, frankly, is living with the fear that it is only a matter of time before a decision, using the cover of the legislation and the linked public interest test, is subject to challenge. Indeed, the unlocking of planning approval for some of the stalled projects doesn’t necessarily mean they will immediately progress to site.

“The absolute shame within this is that we are in a period when public sector capital expenditure is going up and the majority of companies have made great strides towards recovery and enhanced sustainability since the industry’s lowest point. Coupled with the ongoing development of local councils’ Local Development Plans and the gradual recovery of private investment this should be a time of great opportunity within Northern Ireland for the local construction sector. Instead, we are forcing local contractors to grow further the percentage of their work outside of Northern Ireland in order to stay afloat and maintain their current employee numbers.

“Added to this, if we consider matters such as the underfunding of upgrades to Wastewater Treatment Works, which is gradually halting development across Northern Ireland, there is no means by which Northern Ireland can deal with many of the key challenges that confronts it. At a time when we need to consider fundamental restructuring in the governance and funding of some of our key public assets, we are actually sleepwalking into a wholly unnecessary catastrophe which it may take years to see a way out of.

“On the back of last Friday’s talks, we would again urge all those entitled to Executive seats to finally grasp and deal with the concerns held by our industry and many others. However, it has to be said that the longer the impasse drags on the more our members and the staff they directly, and indirectly, employ have the sense that our collective political class is oblivious to their concerns. If such a sense is true, and it is increasingly hard to contradict it, that represents a staggering derogation of responsibility at a time when leadership is required more than ever”.