INFLATIONARY pressure is continuing to pose serious financial concern for the majority of Northern Ireland’s building firms, a new survey has revealed.
The Construction Employers Federation's latest snapshot of the local industry found the majority (62 per cent) expect no growth in 2023.
Inflation was serious issue for 63 per cent, with 85 per cent of firms anticipating material costs will continue to rise.
The survey, carried out in the second half of 2022, is more evidence that the north’s construction sector feeling the brunt of the current economic downtown.
Official government data and successive Ulster Bank PMIs showed the sector in contraction mode during the latter half of last year.
The CEF said its data was sourced from companies which are all headquartered in the north. Between them they have a collective annual turnover of around £2.5 billion.
Half of them reported a year-on-year fall in their profit margins, with 43 per cent bracing themselves for a year of consolidation.
CEF boss Mark Spence said: “Now more than ever we need our political institutions restored to engender much needed confidence within the industry.”
He said while a restored Executive won’t fix all issues facing the sector, he pointed to the Department of Finance’s intervention in August 2021, which resulted in £21.5 million being paid out to firms on existing public sector contracts to help with inflationary pressures and materials delays.
“This type of dialogue must be the model going forward and is, as the evidence has very clearly proven, the only way in which we can jointly meet the challenges we are faced with over the coming years.”
The CEF survey revealed that supply chain issues are now considered “manageable” by the vast majority of firms here (80 per cent).
Most companies (67 per cent) are also either at full capacity or close to full capacity, with just 7 per cent reporting capacity for significant levels of new work.
Mark Spence said that despite the challenges, workloads remain strong, with many firms looking to diversification into other markets and sectors to grow.
But he said: “This positive picture is weighed down by the relentless impact of materials cost inflation over that period which is making sustainable profitability in the sector nearly impossible to achieve.
“This shows no signs of improving into 2023 and when you factor in the significant pessimism within our membership as to new opportunities going forward, we know that a difficult 12–24-month period lies ahead.”
Ulster Bank’s chief economist Richard Ramsey said: “Survey evidence and official statistics confirm that the local construction sector is front and centre in the current downturn.”
He said the supply chain issues and inflation look set to give way to weakening demand in 2023.
“Recovery from the current downturn requires a strong effective working relationship with government," he said.
"This is particularly important as the construction sector responds to the demands of tackling the climate emergency.
“Given the cost-of-living crisis, energy efficiency is more important than ever.
"The lack of a functioning Executive makes this task more difficult."
