Business

Lack of skills one of factors impacting construction confidence

2020 should go down as a one-off year for the construction sector in Northern Ireland
2020 should go down as a one-off year for the construction sector in Northern Ireland 2020 should go down as a one-off year for the construction sector in Northern Ireland

THIS time last year, we were well into the first lockdown, with economic activity severely impacted by the restrictions. Construction sites were closed and contractors and supply chains were engaging in a comprehensive furlough of staff to the point that a state of paralysis was setting into the industry.

Economic output in Northern Ireland in the year to June 2020 therefore decreased by 17.8 per cent in real terms compared to the same period the previous year.

It's been quite a period for the construction sector since last April. The total volume of construction output in the second quarter of 2020 decreased by 30 per cent compared with Q1 2020. It was also 30 per cent lower than the same quarter in 2019. And both the quarterly and annual decreases in Q2 were the largest on record.

But unsurprisingly, a recovery began in the third quarter of 2020 when the restrictions were eased. Indeed, construction was the stand-out performer and the only sector to record two consecutive quarters of growth in Q3 and Q4 2020 according to the NI Composite Economic Index. A 14.9 per cent quarter-on-quarter rise in Q4, and the cumulative 57.9 per cent rise in H2 2020, took construction output to a 10-year high.

An increase in housing activity and infrastructure work has been driving the construction industry’s recovery. There has also been a notable pick-up in repair and maintenance activity in Q4 2020. ‘Other Work’, which is commercial and industrial activity, was the only aspect of the construction industry not to record growth in Q4, the latest figures available from the index.

Despite this overall significant improvement in the second half of 2020, confidence in the construction sector is still lagging other sectors, according to the latest Ulster Bank NI PMI which was published a couple of weeks ago.

One of the major factors in this issue with confidence is the big rises in input costs that the construction sector is experiencing.

Another major challenge is the lack of skills available. The combination of the coronavirus pandemic and Brexit have created a situation where many migrant workers, on whom the local construction sector was very dependent, have returned home.

It is therefore very challenging for the sector to access the skills it needs, across the board, including amongst quantity surveyors, bricklayers and other workers. As construction activity continues to recover as the economy opens up more and more, this will become an increasing challenge.

But despite the challenges, the construction sector has a crucial role to play in a longer-term sustainable recovery. It is adapting to the challenge of climate change with significant adaptions to increase the environmental sustainability of new buildings ongoing. It is also creating the infrastructure the economy and society needs to thrive into the longer-term.

Government has an important role in assisting this. We need to properly fund and upgrade our water infrastructure, we need to invest in our transport infrastructure, our communications infrastructure and other aspects of our infrastructure. Government also needs to ensure that procurement is reformed to meet the needs of the sector and ensure a transparent and level playing field.

So 2020 should go down as a one-off year for the construction sector. But whilst the recovery has been under way, some of the legacies of the coronavirus downturn remain, and the industry will continue to face significant challenges into the months ahead. However, with the right, enabling environment, the sector can be central to economic recovery.

:: Jim Sammon is construction spokesman at the Royal Institution of Chartered Surveyors (RICS) in Northern Ireland, which has more than 3,000 cross-sectoral members comprising of chartered and associate surveyors, trainees and students.