Business

Survey: Inflation and shortages wreak havoc on NI construction industry

Some 27 per cent of building firms have been critically impacted by rising costs, according to a new survey.

ALMOST half of all construction firms in the north have said rising costs and material shortages have seriously impact their business, resulting in building projects being delayed.

The new survey from the Construction Employers Federation revealed one-in-four (27 per cent) have been critically impacted by the record levels of price inflation, creating a business risk.

The trade body carried out the research during the second half of 2021, as building firms endured record levels of price inflation and supply chain delays.

The CEF said the companies which took part in the study represent a combined turnover of more than £1 billion per annum.

Some 46 per cent said the rising costs in the second half (H2) of 2021 had seriously impacted the business, causing financial concern.

Almost the same number (47 per cent) said material shortages had seriously impacted and delayed construction projects.

The surging costs across the industry saw the Executive approve a Procurement Advisory Note (PAN) for government contractors.

Although introduced to assist firms with delays and make allowances for inflationary prices, 42 per cent of the respondents to the CEF survey said government clients have still not engaged on potential claims.

CEF Managing Director Mark Spence said the survey reflects one of the most difficult periods in recent times for the local industry.

But he said: “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”.

In the wake of the survey, and with the countdown now on for the next Assembly election, the industry body has published what it says is the sector’s key asks of the next Executive:

• 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.

“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,” said Mr Spence.

“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,” he continued.

“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."

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