Tughans Solicitors

Housebuilding remains a bright spot in Northern Ireland’s challenging construction sector

RICS and Tughans Northern Ireland Construction & Infrastructure Market Survey, Q2, 2018

Private housing was the only part of Northern Ireland’s construction sector reported to be in growth mode in the Q2 2018 RICS (Royal Institution of Chartered Surveyors) and Tughans Northern Ireland Construction & Infrastructure Market Survey.

Overall workloads were reported to be broadly flat for the fifth quarter in a row (a net balance of +2% of respondents said that workloads increased), significantly below the UK average (a net balance of +15%), and below all other UK regions

Infrastructure workloads and public non-housing workloads are also facing serious challenges according to the survey, with the balance of respondents (-24%) in both sectors saying workloads had decreased in Q2.

Less significant falls in activity in the public housing and private industrial sector were also recorded while private commercial sector activity was said to be flat.

Looking ahead, Northern Ireland surveyors remain the least optimistic in the UK. The Northern Ireland outlook is flat, with a zero net balance for 12-month expectations, compared with an average net balance of 41% across the rest of the UK.

When it comes to expectations around employment and profit margins for the next year, the Northern Ireland figures are both now in negative territory.

Despite this, there was a rise in the number of surveyors saying there are shortages of quantity surveyors, other construction professional and blue collar workers; albeit that these figures are much lower than those reported in the rest of the UK.

Jim Sammon, RICS Northern Ireland Construction Spokesman said: “While it is encouraging that housebuilding is continuing to grow in Northern Ireland the picture presented by the survey is somewhat different across the rest of the industry, and, perhaps unsurprisingly, Northern Ireland surveyors are feeling less optimistic about the outlook than they were.

“Our respondents are telling us very clearly that without a functioning Executive they have serious doubts about the ability of departments to approve strategic planning decisions and future expenditure on major projects. This is a situation that needs urgently addressed, particularly in relation to infrastructure activity.

“A lack of clarity on Brexit is also being cited as a major issue for the local industry because it leaves companies unable to make firm plans for the future.

“It is noteworthy though that respondents continue to report skills shortages, perhaps driven by the continuing growth in house-building. This highlights the important need to continue to invest in skills and to encourage young people to opt for a career in surveying and the wider construction sector,” he adds.

Tim Kinney, Construction Partner, Tughans, said: “Those hoping to see evidence of an increase in office, retail and leisure development or further investment in our infrastructure, won’t find it in the latest survey. A further upturn in housebuilding is certainly to be welcomed but it really is the only bright spot in an otherwise challenging environment which is being exacerbated by the lack of decision-making to push forward key infrastructure projects.

“Indeed, the latest official construction output statistics point to a worrying decline in government spending, with £590.1m of new public sector work in 2017, compared with £641.8m in 2016. In the first quarter of 2018 output decreased by 6.5% compared with Q4 2017 and was 6.1% lower compared with the same quarter in 2017,” he adds.

 

The key headline Northern Ireland findings of the latest survey are as follows:

  • The headline workloads net balance was at 2% in Q2 indicating that workloads were broadly flat for the fifth quarter in a row. This was significantly below the UK average of 15% and below all other UK regions
  • The only subsector with a positive reading was private housing where a net balance of 28% of respondents said they had seen growth in the last quarter. The private commercial sector had a flat reading (a net balance of 0%) while the net balance of respondents in the infrastructure (-24%), public non-housing (-24%), public housing (-13%) and private industrial (-6%) sectors reported reductions in workloads.
  • Looking ahead, Northern Ireland surveyors remain the least optimistic in the UK. Expectations around workloads for the next 12 months are flat (a net balance of 0%) compared with an average of 41% across the rest of the UK who said they expected workloads to grow.
  • The picture is negative when it comes to expectations around employment for the next year with a balance of -5%.
  • Respondents in Northern Ireland were most negative around profit margins for the next 12 months with a net balance of -20%.
  • Concerns around the shortage of quantity surveyors are the lowest in the UK. 33% of Northern Ireland respondents cited shortages in this area compared to 58% for the UK as a whole.