Infrastructure activity remains in decline as lack of Executive impacts investment
RICS & Tughans NI Construction & Infrastructure Market Survey, Q3, 2019
The third quarter of 2019 saw a further drop in local construction workloads despite the declines in many subsectors easing back, according to the latest RICS and Tughans Construction and Infrastructure Market Survey.
Private sector housebuilding continues to be the only subsector in Northern Ireland where activity is increasing, according to surveyors, albeit at a slower rate than in Q2, when the net balance was at its highest level since Q1 1999.
All other sectors recorded net balances below zero, indicating that workloads continue to fall, albeit that the rates of decline have eased in the private commercial and private industry subsectors.
Worryingly, the net balances for infrastructure and other public works activity are now at their lowest rate since Q1 2012. 46% more respondents said that infrastructure activity was lower relative to the previous quarter than said it was higher. A net balance of 50% said that activity in the other public works was lower.
Anecdotally, comments from respondents point towards the current uncertain political landscape in Northern Ireland as having a negative effect on the sector. The lack of an NI Executive and Assembly was cited as the cause of restrictions on local public projects and infrastructure activity in particular.
This is coupled with concerns from respondents around the potential implications of Brexit relating to trade and investment.
As a result, the year-ahead forecast for workloads has dropped into negative figures for the first time since 2013 and expectations for employment are flat.
Jim Sammon, RICS Northern Ireland Construction spokesman, said: “Activity continues to be relatively strong regarding private building. However, the ongoing political instability and uncertainty is clearly having an effect elsewhere, particularly regarding infrastructure workloads.
“That said, surveyors are still reporting a shortage of skilled professionals in the industry, which reinforces the need to continue to invest in industry skills such as quantity surveying, as well as the job opportunities that exist for a career in construction,” he adds.
Senior Partner, Michael McCord, Tughans said “Private house building aside, this year is shaping up to be something of a year to forget for the construction industry in Northern Ireland. Firms in the sector will no doubt be hoping that 2020 marks a turnaround when greater certainty can be achieved in the wider economy, and that the Northern Ireland government can be restored to facilitate key decisions that will support investment. In the meantime, many firms continue to be very dependent on work outside of Northern Ireland, which is testament to their skill and their ability to compete across the UK and beyond.”
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 Q3 was -14%, meaning that 14% more respondents perceived a fall in workload in this quarter than those reporting rises
- Public non-housing activity remains in decline according to a net balance of -50% of respondents, with public housing also suffering as a net balance of -29% reported a decline
- Infrastructure activity reportedly dropped to its lowest since Q1 2012 according to a net balance of -46%
- Private industrial activity remains in decline although at a less drastic rate (-42% from -64% in Q2), with private commercial workloads experiencing a similar result (-25% in Q3 compared to -5% in Q2)
- Private housing workloads continue to rise (although at a slower rate) as a net balance of +18% indicated an incline in activity
- Looking forward, Northern Ireland workload projections are lagging behind their UK counterparts and have fallen into negative figures at a net balance of -9%. This means 9% more of responding surveyors believe they will fall than rise in the next year
- Expectations for employment has therefore dropped to a flat 0 and respondents have predicted profit margins will remain in negative territory (net balance of -23%)