David McNeice: Post-Covid construction - are we dancing on a volcano?
THE sentiment within the UK and Ireland is that things are returning to normal – and slowly yet surely, we are starting to see the light at the end of the tunnel.
We should (or at least we should try to) be positive, as we are coming out of something that has collectively and universally united us; at least in the combined struggle we've all been through.
The good news is that construction is on the up. The construction industry generally serves as a litmus test for the wider Irish and UK economies: when construction is doing well, the economy tends to follow suit; likewise, when construction dips, it is a good indicator the rest of the economy won't be far behind.
The positive news is since the catastrophic cliff edge that was caused by Covid, we are seeing a noticeable uplift in construction, looking to return to (or in some instances improve on) pre-Covid levels. You only have to look outside to see the cranes in the sky and the diggers on the ground again to know construction is definitely moving in the right direction.
The difference between the latest recession and the one we felt in the immediate aftermath of Covid is the banks and government still have money and are still lending. This recession was not caused by a financial crisis or a bubble bursting; and there is encouragement to "get back to normal" as soon as possible. But we only need to take one look at interest rates and inflation to know that things can't (and perhaps shouldn't) just continue as they were before.
Now for the worrying bit. The question is whether the industry can sustain this increase in output; and/or whether there is too much too soon after a global pandemic for the industry to deal with a growing demand to progress delayed projects and take new ones on.
Fundamentally, we are in a material and labour supply shortage. The Construction Leadership Council (CLC) in the UK in its latest report of June sets out the lack of supply of concrete was just the tip of the iceberg, with timber and steel prices going through the roof and supply not being readily available. The CIF in Ireland are just as pessimistic about the state of demand in construction in light of Covid disruption; especially considering Ireland remains in the midst of a housing crisis that is only getting worse!
We know the knock-on effects of Covid are going to be felt for many years to come, and in the background the spectre of Brexit continues to lurk; but what we cannot do is push the construction industry now to a point that will enevitably lead to another crisis.
In summary, whilst it may appear there are great strides or movements in the right direction, not everything is not as positive as it seems.
This does not bode well for the Irish housing crisis, the continued health of the construction industry and ultimately the wider economy. It's time to draw breath and think smart, or we could face another inflation crisis very soon.
:: David McNeice (email@example.com) is partner (construction and infrastructure) at DWF Belfast (www.dwf.law)