NuGen Properties

Northern Ireland contractors see little to cheer about

Belfast City Hall

Construction companies in Northern Ireland are plenty busy enough at the moment, but there is growing pessimism about market opportunities over the coming year, their trade body has found.

The Construction Employers Federation’s latest construction survey collected data from firms with headquarter in Northern Ireland, representing a collective annual turnover of £2.5bn.

It found that profit margins had worsened or significantly worsened in 2022 (compared to 2021) for 50% of the companies. Only 20% had seen an improvement.

A majority (62%) expect no growth in turnover this year. Indeed, some 43% are looking to consolidate their business over the coming 12 months. Only 27% are looking to increase profitability.

Just 13% foresee any increase in business opportunities in Northern Ireland in 2023, while 60% see the local market declining further.

On the plus side, 67% of firms said they were either at full or almost full capacity. Only 7% currently have capacity for significant levels of new work.

And materials shortages have receded, with 80% saying that any issues are now manageable – although 85% expect material costs to continue to rise

Mark Spence, managing director of the Construction Employers Federation, said: “The results of our Construction Survey detail the resilience of Northern Ireland’s contractors and homebuilders in the face of the never-ending pressures of the last number of years. Current workloads remain strong, and many have grown their businesses by diversifying into other markets and sectors – showcasing the innovation and talent of the firms, their employees and supply chains across the UK, Ireland and beyond.

“In tune, however, with other recent surveys such as the Ulster Bank PMI, 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 chief economist Richard Ramsey added: “Survey evidence and official statistics confirm that the local construction sector is front and centre in the current downturn.  Last year Northern Ireland’s construction industry underperformed against other sectors and its peers in the rest of the UK and the Republic of Ireland.  In the face of unprecedented supply-chain disruption and inflationary pressures, the resilience of local firms has been severely tested over the last two years. Planning, procuring and pricing work over this period has been extremely difficult. Fortunately, cost pressures and building material shortages have begun to ease from their extreme levels. How this evolves in 2023 will be influenced by two key factors – the war between Ukraine and Russia, and China’s economic recovery. With the lifting of Covid-19 restrictions, there is expected to see a surge in economic growth from Q2 this year. This would provide a new source of inflationary pressures on energy, commodities and building materials.”

He continued: “The construction downturn is particularly marked within housing with activity down almost 15% year-on-year in Q3 2022. Outside of the first lockdown back in Q2 2020, housing activity plumbed a seven-year low in Q3 2022. House-builders should see a significant easing in supply-chain disruption for building materials as demand falls. But the cost of living crisis and rising interest rates will hit housing affordability and demand. 2023 is set to be a more challenging year as concerns over supply-chain difficulties and inflation give way to weakening demand. There is also an over-supply of office space, pressure on capital spending budgets, and impediments such as inadequate infrastructure to enable development.

“Recovery from the current downturn requires a strong effective working relationship with government. 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.  If and when an executive does return to Stormont, the construction sector will find it is competing with multiple stakeholders to get its voice heard.”

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Dan Morten 18/01/22

Easy to work with, Jordan and the team were professional and were easy to communicate with.
Would highly recommend.

Di Hayes 20/08/22

NuGen Properties built an extension to the rear of my property, replacing the old conservatory. I am so pleased I chose this company. From the initial quotation, through the build and after they were professional, polite & well mannered. They kept the site tidy throughout the build and kept me informed of each stage as it happened. The work was finished to a good standard and I have had nothing but compliments on their work. I am already planning for them to come back and do some more work for me in a few months. I would 100% recommend them.

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