Aecom’s annual analysis of construction in Northern Ireland says the cost of construction increased by 1.5% in 2020 and is anticipated to increase further between 1% and 1.5% in 2021.
Construction output fell by 30% in Northern Ireland during the height of the pandemic in 2020, with hospitality, retail, and commercial construction most affected.
However, Aecom predicts 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, Aecom’s Northern Ireland director, 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.”
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