An annual construction industry review, published today by the world’s trusted infrastructure consulting firm, AECOM shows construction in Northern Ireland had a ‘normal’ year in 2023 with more stability and predictability than the volatile preceding years.
However, a failure to reinstate a functioning government remains a barrier to growth with the political deadlock in Northern Ireland preventing key strategic decisions on the country’s infrastructure being made and slowing down the pipeline.
While public infrastructure investment remains stymied by political inertia, in contrast, the private sector is operating more positively. The long-awaited Windsor Framework, which came into full effect on October 1st, 2023, has provided a clear path for Northern Ireland to trade with the UK, while also staying in the EU single market.
In the twelve months to the end of June 2023, total construction volume output in Northern Ireland was up 7.8 per cent year on year. Growth was primarily driven by repair and maintenance work, which in 2023 saw a year-on-year increase of 17 per cent. Infrastructure also had a significant increase of 9.3 per cent over the 12 months to June 2023, although this slowed to only 2.6% in the last quarter.
Tender price inflation in Northern Ireland rose 9 per cent over the course of last year, which was lower than 2022’s figure of 12 per cent. Overall material and labour costs are still rising but at a much slower rate than over the past two years and at a lower rate than general inflation within the wider economy. AECOM believes that while the type of projects and the composition in costs between labour and materials will change, tender price inflation will continue to ease over the course of 2024, to an average of 3.1 per cent.
Commenting on the report Jody Wilkinson, Director AECOM Northern Ireland said: “While there are signs in the wider UK economy that a slowdown is coming, Northern Ireland’s economy is more closely related to the Republic of Ireland which remains strong. The Northern Irish construction industry continues to adapt to change in supply chains, inflation and shifting demand between public and private sectors. It seems to be holding up, albeit with less optimism than last year.
“Until such time as Ministers are back to work at Stormont there will be stalemate in the public sector with the pipeline slowing and in some cases being paused, with no guarantee as to when political stability and leadership will return to provide investment and a clear direction of travel.
“It is possible that over the next twelve months Northern Ireland will see a two-tier industry emerge. In this scenario the public sector will remain relatively subdued until the government is in place to make investment decisions. Meanwhile, the higher growth, more independent private sector will benefit from foreign direct investment, particularly from the US.
“It is vital that this year brings renewed determination by industry and investors alike to seize on Northern Ireland’s decarbonisation potential. Northern Ireland was the last part of the UK to pass its own climate change legislation and as a result is decarbonising at a slower rate than the rest of the UK. With the long-awaited introduction of the Climate Change Act in 2022, energy transition policy for Northern Ireland is now in place. Time is of the essence as we have much catching up to do.”
AECOM’s annual review also shows that housing output remained strong in 2023 with an increase of 15.1 per cent mostly in public sector housing stock. House prices have increased slightly, by 2.3 per cent, over the 12 months to August 2023, making Northern Ireland the best performing region in the UK, where overall house prices have fallen by around 5 per in the past year.
Retail in Northern Ireland had a very busy 2023 with several large shopping centre transactions taking place. This injection of activity and liquidity will flow through 2024 to capital investment in refurbishment and should encourage new retailers to set up shop in Northern Ireland. Vacancy rates are also dropping across Northern Ireland, and particularly in Belfast. AECOM says this sector is likely to continue to be challenged by rising costs and labour availability but on balance is positioned to have a better year ahead than anticipated 12 months ago.