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Wed August 12 2020

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Northern Irish construction hits seven-year nadir

9 Dec 19 Construction order books in Northern Ireland have now been shrinking for 15 consecutive months.

In November 2019 construction output in Northern Ireland fell to a seven-year low, according to the latest monthly Ulster Bank Northern Ireland business activity survey. It suffered the sharpest rate of decline in 92 months, since spring 2012.

In the Ulster Bank Northern Ireland business activity index for November, construction scored just 35.4 out of 100 – where any score above 50 indicates growth since the previous month and below 50 means contraction.

All sectors of the Northern Ireland economy have been suffering but while the manufacturing and services sectors are at least somewhat optimistic about prospects improving in 2020, the construction and retail sectors remain pessimistic.

Despite the difficulties faced by the construction industry in Northern Ireland, employers seem notably reluctant to let staff go. While the activity index was 35.4, the employment index for construction was 46.4, meaning the workforce did reduce but not by as much as overall construction activity.

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Richard Ramsey, Ulster Bank’s chief economist for Northern Ireland said: “Construction order books continuedto shrink for the 15th month in a row and November marked the sharpest rate of decline in 92 months. It is a similar story for retailers with orders falling at their fastest pace since March 2009.“In this environment, firms’ desire to maintain staffing levels comes at a cost to profit levels. The latest survey shows that input price inflation continued to rise in November, but firms are not able to pass these increased costs onto their customers and indeed discounting is widespread in an attempt to generate new business.

“Firms therefore seem willing to take a hit to their profits in the short-term in the hope that conditions will improve once there is greater certainty around the situation with Brexit. Indeed, their expectations for the year ahead are relatively upbeat overall with an expectation that business conditions will have improved marginally in 12-months’ time; albeit that this is largely confined to manufacturing and services.

“This may well prove to be overly optimistic however as even if a Brexit deal is passed there is still much to be decided around the new relationship with the EU and how any new arrangements would work. Uncertainty will therefore continue to be very much present in 2020.”

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