NI construction beat 2021’s challenges

Aecom’s annual construction industry review found that the construction industry in Northern Ireland performed well last year despite challenges posed by Covid-19 and Brexit. By the second quarter of 2021 construction output was already at 3.8% above the pre-pandemic levels in the final quarter of 2019.

Aecom said that 2021 has proven to be a surprising year in relation to the Northern Ireland Protocol and how pronounced the effects have already been on trading patterns within the British Isles. As trade between businesses in Great Britain and the Republic of Ireland became more complex, total exports from Northern Ireland to the Republic surged by 60% to £2.4bn in the first nine months of the year. Over the same period, total imports from the Republic of Ireland to Northern Ireland surged by 48% to £2.1bn. The combination of material and labour shortages saw Aecom’s tender price index increase by 6.5% during 2021.

Jody Wilkinson, director Aecom Northern Ireland, said: “Leaving politics to one side, the protocol seems to be having an overall positive effect on the Northern Ireland economy in the sense that it is an advantageous position of having one foot in and one foot out of both the European Union single market and the UK market. Companies who are locating to Northern Ireland cite this as a key draw. However, businesses are still extremely cautious as they wait to see if the UK government will trigger Article 16 which could see Northern Ireland lose its current advantage amid an atmosphere of uncertainty. During 2021 the sector was dealing with the ‘double whammy’ of global material shortages and the added layer of complexity brought about by the structural changes of the protocol. Some contractors were forced to wait months for some of the most basic construction materials like timber, steel, and cement and it does not look like that will improve much in 2022. A shortage of skilled labour is also an issue as we work through pent-up demand from last year’s disruption. A healthy pipeline of work in Northern Ireland is compounding the problem, as is the strong industry rebound in the Republic of Ireland.”

Looking ahead to 2022, Aecom expects the year to be more ‘normal’ with fewer extremes than the last two years with the construction industry and wider property industry enjoying a solid workload over the next 12 months. If uncertainty associated with the Northern Ireland Protocol is resolved, Aecom predicts a year of sustainable growth with tender price inflation of around 4.5%. In relation to housing, Aecom said that the private sector will continue to grow in 2022, buoyed by a shortage of stock and demand for modern, energy-efficient homes suitable for hybrid-working families. Belfast also looks set to embrace the private rented sector with a number of sizable schemes starting in the city. Aecom said this will boost both the supply and standard of housing stock available in Belfast.

Aecom said that, building on the momentum from COP26, 2022 is the year that net-zero carbon targets are being firmly pushed to the forefront. Northern Ireland does not yet have legislation in place to deal with the climate emergency, though the Northern Ireland Executive is considering two bills on the issue. Whichever bill is passed, Aecom said that there will be significant opportunities for the industry with an annual investment of around £1.3bn being required by 2030. A suitably trained workforce, as well as finance from both the public and private sectors, will be needed to rise to the challenge, it said.

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