Gaps in Government support for construction need addressing to avoid an ominous future

RICS & Tughans NI Construction & Infrastructure Market Survey, Q1, 2020

Market confidence in the outlook for Northern Ireland’s construction sector has fallen sharply, according to the latest RICS and Tughans Construction Market Survey, as a deterioration in momentum resulting from social distancing measures to stop the spread of coronavirus is expected to continue.

 

Perhaps unsurprisingly, Northern Ireland contributors to the survey envisage a fall in workloads and profit margins as well as a freeze in new hiring in the coming year.

 

A net balance of -36% expected workloads to be lower in a year’s time when the survey was carried out. And a net balance of -45% expected profit margins to be lower in the same timeframe.

 

This is despite a relatively upbeat picture in Q1 until the social distancing measures were introduced, with an overall positive net balance reported. However, the survey responses when analysed by date of submission show weaker sentiment coinciding with the stricter lockdown.

 

Overall, workloads were reported to have risen in Q1 according to a net balance of +13 percent of Northern Ireland respondents. Housing (both private and public) and private commercial workloads were reported to have risen, whilst private industrial and infrastructure workloads were said to have been in decline.

 

Jim Sammon, RICS Northern Ireland construction spokesman, said: “It is hardly a surprise that expectations for the local construction sector have fallen. The fact that the forward-looking metrics have softened materially though, suggests that it will not simply be a case of returning to where the industry was prior to the onset of Covid-19 as the government begins to ease the lockdown. Partly this reflects uncertainty about the likely state of the economy at this point and how this will impact on development, but it is also indicative of the challenge the sector is currently under as it attempts to access government funding to keep heads above water.”

 

Tim Kinney, Partner at Tughans, said: “The construction sector is a crucial contributor to the Northern Ireland economy both in terms of economic output and in respect of its role in building our infrastructure and our competitiveness. The lockdown is having a deep impact on the sector’s ability to operate, including the ability to work on site, the availability of labour, and the supply of materials. Government support measures are clearly vital at present and this may need to be stepped up in the weeks and months ahead. These are very difficult times, but it is important that everything possible is done to safeguard and protect the industry, its skills and its potential for the future.”

 

Hew Edgar, RICS Head of Government Relations, added: “The supporting measures that the Government introduced in the immediacy for the built environment – covering pay, rent, and business operating costs to name a few – were welcome, but it has become apparent that there are gaps that need addressing; not least parity in approach across the UK.

“The UK Government must start exploring how the sector could taper the reopening of non-essential construction sites within stringent parameters of health and safety adherence; introduce grants; and review how repair and maintenance work could proceed whilst publicly buildings are not fully occupied.  A combination of these will support professionals, the workforce, manufacturers and supply chains by providing a pipeline of work and vital cash flow in the short term.

“Fiscal stimulus is most effective once construction starts on site; only then does finance start to flow down the supply chain. As such, the Government should explore how best to accelerate and enable the design, planning approval, and procurement of construction projects to ensure construction-ready schemes can start when the pandemic subsides.”

The key headline Northern Ireland findings of the latest survey are as follows (all figures are the net balance of respondents):

  • The net balance of workloads/activity for Q1 was +13%, meaning that 13% more respondents reported a rise in workloads in Q1 than reported a fall
  • The balance for public housing workloads was +50%, meaning that 50% more respondents reported a rise in workloads that reported a fall
  • Private housing workloads rose in Q1 according to the survey, with a net balance of     +29% percent
  • The balance for private commercial activity was positive for the first time since Q4 2018 at +21%
  • Private industrial activity remained in decline for the eighth quarter in succession with a net balance of -40%
  • The infrastructure workloads balance remained in negative territory at -14%
  • Looking forward, Northern Ireland workload projections for the 12-months ahead have unsurprisingly taken a turn for the worse. A net balance of -36% expect workloads to be lower in a year’s time
  • A net balance of -45% expected profit margins to be lower in a year’s time
Gaps in Government support for construction need addressing to avoid an ominous future
News

April 24, 2020

6:58 am