The survey, which collected data from NI-headquartered firms which have a collective annual turnover of approximately £2bn, covers the last 12 months (2022/23) and reflects on many of the key challenges that contractors, civil engineers and homebuilders are facing currently.
The main findings included:
• While over 50% of respondents said their turnover had increased by at least 10% this year, 45% said that their profit margins had worsened. Only 9% said profit margins were better this year compared to last
• Over the last year, some 70% of firms were operating at full or almost full capacity
• On the industry's skills challenge, the 3 main issues that were identified were:
– Specific skills shortages in construction trades
– Visibility of pipeline and market confidence to recruit new workers
– The perception of construction as an attractive career path
• Materials shortages are largely resolved: 85% said any issues were now manageable
• However inflationary issues show no sign of abating: 55% said these were having a serious impact causing financial concern or a critical impact leading to contractual or business risk
• In the NI public sector market since the introduction of PAN 01/21 in August 2021, at least £38 million has been paid out to firms on existing public sector contracts to help with inflationary pressures and materials delays
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• When looking to the GB and RoI markets, 3 main reasons were given as to why they are more attractive for contractors:
– More secure pipeline
– Increased profit margins
– Better contract terms
• Looking to the next 6 months, the key challenges identified are:
• Political uncertainty/no functioning Executive
• Lack of pipeline in Northern Ireland
• Inflation
• Access to skilled labour
Mark Spence, Managing Director of the Construction Employers Federation, said of the results: "While the challenge of inflation is being felt across the economy, this survey points to two very specific factors in our sector which are of concern – tight margins and lack of pipeline.
"Although we can point to a majority of our members telling us that their turnover is growing, it is becoming increasingly difficult to complete much of this work at anything other than breakeven. That, in the short to medium term, can have very negative consequences if the pipeline of works doesn't return to some level of buoyancy.
"With the market in Britain being a very mixed picture and the proposed huge levels of public investment in Ireland yet to truly hit the ground, it is vital that the local pipeline is healthy – something that we know couldn't be further from the truth. For the first time in as long as anyone in the sector can remember, many Government Clients entered this financial year with no discretionary expenditure – leading to the cancellation of huge swathes of tendering activity. When you add to this the context of our overall public capital investment being at the same level annually as it was, in cash terms, as 2007/08 then we face a very difficult period ahead.
"Unquestionably, there are opportunities – from the City Deals to the Shared Island funds to the prospects for major reform of the governance and financing of NI Water and the Housing Executive – but the true realisation of these can only come with a restored and fully functioning NI Executive and Assembly which can chart a forward path of public investment in which all can have confidence.
"This survey again reflects what the NI Executive and the construction sector can achieve when they work together. Over two-year period since the introduction of the PAN 01/21 Material Cost Assistance measure that CEF negotiated with the Department of Finance to mitigate against the difficulties of material shortages and cost increases, our members have reported an at least £38 million benefit to the public sector projects they have been working on. This has ensured project and contractor viability across huge swathes of government activity and has only been achieved where our members and their clients have worked together in the spirit of openness and transparency.
"Amongst our membership, we recognise the stark challenges that we face on matters such as carbon reduction, growing the number of new build homes and building high quality education and health assets for our population – but to achieve this we need an Executive in place to maximise the opportunities that much needed investment can bring to not just our community but also the firms, their employees and supply chains who are in dire need of a confidence boost."
