NI Construction Industry Set To Remain Stable in Year Ahead

    An annual construction industry review, published by AECOM, predicts that the Northern Irish construction industry will remain stable in 2021. The report also indicates that, despite the challenges presented by Covid-19 and Brexit, the sector is one of the better performing industries at the moment in Northern Ireland.

    The report highlights that construction output fell by 30% during the height of the pandemic in 2020, with hospitality, retail, and commercial construction most affected. The report also suggests the cost of construction increased by 1.5% in 2020 and is anticipated to increase further between 1% and 1.5% in 2021.

    However, AECOM predict that once the current pent up demand from the period of lockdown slows, there will be a subsequent reduction in the cost of labour and, despite global competition for supplies as a result of the pandemic, the new trade agreement between the UK and EU should help mitigate against any significant cost increases in materials for the industry in Northern Ireland.

    Jody Wilkinson, Director AECOM Northern Ireland said: “Throughout the entire pandemic, the construction industry demonstrated both its resilience and resourcefulness. The modest growth figures which have been recorded and the reasonable outlook for  2021,  place the construction industry in a favourable position despite the ongoing challenges presented by Covid-19.”

    “The industry did experience a significant shock in 2020 with a reported collapse of 30% in the height of the pandemic. Hospitality, retail, and commercial development has all but halted in Northern Ireland and, while hospitality and retail should expect a modest recovery in 2021, the future is unclear for commercial construction due to the reduction in demand for office space.”

    “In October 2020, the construction industry was the strongest part of the economy and the only sector to report growth in output and orders that month. The rebound in activity and quick recovery was undoubtedly due to the government supports available during the pandemic and the continuation of public projects and developments.”

    “Although the cost of construction will increase by a further 1% to 1.5% in 2021, we believe Northern Ireland will remain competitive in comparison to other countries as the new trade agreement should provide for cost effective importing and exporting and present Northern Ireland as an attractive place for investment due to its access to both markets. While the current situation with potential tariffs on steel imports is indeed worrying for industry, its impact on output for 2021 will depend on if/when it is enforced and if counter-measures are put in place by the Government. Also, as sustainable building practices continue to expand, this could be the catalyst that shifts demand from steel to more environmentally friendly alternatives such as timber for certain buildings.”

    “We expect housing to be the key for sustained industry growth in 2021. The persistent demand for housing permeates across both the public and private sector as the population of Northern Ireland continues to grow, with a projected increase of 3.5% by 2033. The introduction of the Belfast 2035 growth plan and the increased focus on sustainable transport models also present real opportunities for the industry this year.”

    Irish Republic

    Meanwhile the report predicts impressive growth levels for the sector in the south of Ireland in 2021 despite challenges and delays presented by Covid-19 and Brexit. It says that whilst construction output is unlikely to reach pre-Covid 19 levels, it is expected that development in 2021 will significantly exceed 2020 levels.

    While 2021 has got off to a bad start for the industry, the report anticipates a strong year for the sector based on a presumption that normal activity will resume shortly as the vaccine roll-out continues. The report indicates in general terms that demand has not been impacted but rather activity is delayed.

    John O’Regan, Director AECOM Ireland said: “Despite the challenges associated with the dual impact of the Covid-19 and Brexit, the projected growth rate of 15% for 2021 highlights the industry’s resilience at the moment. While the first lockdown was very difficult, as an unanticipated event, the sector is now more prepared to effectively manage the associated challenges related to materials, cost, and logistics. That being said, hospitality and retail has been put on hold and, while significant commercial office developments are proceeding on site, the uncertainty around the shape of the future office workplace will slow demand in this sector.”

    “Our report also suggests that, while we are dealing with two very real threats to our supply chains, the price inflation for 2021 will only be marginally higher than 2020, reporting at 2%. This is very positive news for the industry and for consumers as there was considerable anticipation that the cost of building would climb sharply in 2021.”

    “Looking ahead, our report highlights that a key element of promoting sustainable growth for the construction industry is ensuring that promised rail projects such as the Dart Expansion and Metrolink progress as planned. While it may not seem priority now, we must double down our commitment to rail development as it will enhance our work life balance, support housing and development outside of our cities and go a long way towards our carbon emission targets.”