With the Conservatives and DUP agreeing increased funding for the region, and a sizeable chunk of it going to infrastructure projects, Northern Ireland looked to be the big winner from June鈥檚 election. But does ongoing political turmoil put much of this construction work at risk?
Northern Ireland鈥檚 airports, early on a Monday morning, are the perfect venue for construction networking. A large number of the bleary-eyed passengers waiting to board will be employees of the province鈥檚 top contractors, jetting off to the mainland to work, says Jody Wilkinson, project director in Aecom鈥檚 320-strong Belfast office.
鈥淵ou just need to walk into Belfast International or George Best City airport on Monday morning and take a look at who is getting the EasyJet and Ryanair flights. It鈥檚 everybody from firms like Graham and Gilbert Ash, all working over in London or Scotland.鈥�
However, the direction of travel may be going into reverse following last month鈥檚 deal between Northern Ireland鈥檚 Democratic Unionist Party (DUP) and the Conservatives. Of the 拢1bn of extra spending secured by the DUP鈥檚 10 MPs, 拢400m has been earmarked for infrastructure projects over the next two years.
Here, 好色先生TV examines how the infrastructure largesse will be distributed, the opportunities that this new investment opens up, and how much difference it will make to the health of Northern Ireland鈥檚 construction market. We also look at how political turmoil - notably the continuing impasse over power-sharing arrangements and Brexit - threatens to nip in the bud a much-needed boost to the Northern Irish construction sector.
Big money
The 拢1bn of extra funding for the province formed a major part of the government鈥檚 鈥渃onfidence and supply鈥� deal with the DUP, but some politicians in Wales and Scotland have stated that they find the deal unacceptable, believing it gives Northern Ireland preferential treatment over other nations and regions in the UK. But the reception has been understandably more enthusiastic in Northern Ireland鈥檚 construction sector, particularly given the ringfencing of just under half of that sum for construction projects. 鈥淚t鈥檚 no doubt going to make a difference,鈥� says Wilkinson.
The main project set to benefit from the 拢400m cash injection is the planned York Street interchange in Belfast, which is one of seven so-called 鈥渇lagship鈥� infrastructure projects identified as a priority by the Northern Ireland Executive before it was suspended earlier this year. The interchange is designed to fix the bottleneck where three of Northern Ireland鈥檚 biggest roads converge.
John McIlwaine, managing partner in the Belfast office of consultant Bruceshaw, says: 鈥淚 used it this morning because the schools are off but on a normal day it鈥檚 madness,鈥� he says, noting that it is normal to sit in a traffic jam for up to 15 minutes at the interchange.
Improvements to the junction have been more than a decade in the planning, but hit a snag following last June鈥檚 EU referendum. The 拢160m project had been pencilled in to receive EU funding from a Brussels programme to improve transport links between member states: one of the roads feeding into the junction is the motorway connecting Belfast and Dublin.
However, the EU had yet to sign off on this by 23 June. 鈥淸The EU] wouldn鈥檛 have been liable for guarantees for projects that had a letter of offer before the referendum vote,鈥� says David Fry, assistant director of the Construction Employers Federation, which represents Northern Ireland鈥檚 contractors. This means that now the EU has no obligation to fund the project and it has confirmed the funds will not be allocated. The extra funding agreed with prime minister Theresa May will fill the gap left by this EU funding.
[The 拢1bn funding agreed by the DUP] is no doubt going to make a difference
Jody Wilkinson, Aecom
The infrastructure project will also open up the regeneration of Belfast鈥檚 north harbourside, located on the opposite side of the River Lagan from the revamped Titanic Quarter, named after the ocean liner that was built in the city鈥檚 dockyards. 鈥淚t will help the north side of Belfast. The Harbour estate [which owns the harbourside area], is certainly banking on it,鈥� says Neil Dunlop, an ex-president of the Northern Ireland Royal Town Planning Institute.
Four of the other six 鈥渇lagship鈥� projects had already been earmarked support in the Northern Ireland executive鈥檚 budget. These are upgrades to the A5 and A6, the Belfast Rapid Transit bus system and a new transport hub at the city鈥檚 Queen鈥檚 Street rail station.
However, the real significance of the 拢400m cash injection is that it will free up cash for smaller projects, which had looked to be set squeezed under the government鈥檚 previous spending plans.
Under the pre-deal plans, Fry estimates that by 2020, 拢450m of the executive鈥檚 拢1.2bn capital programme, which runs up to 2019/20, would have been taken up by the flagship projects. The extra investment means that a bigger chunk of that budget will now be available for work on schools, healthcare facilities and roads.
And that will of course be good news for Northern Ireland鈥檚 contractors, says Fry: 鈥淔or the vast majority of our members, their lifeblood is education, health, and minor roads.鈥�
The nature of Northern Ireland鈥檚, albeit governance arrangements means that 鈥渕oney will be spread out purely for political reasons,鈥� says Wilkinson. The Good Friday Agreement鈥檚 power sharing rules means that portfolios are divvied up between the main parties in the Northern Ireland Assembly, rather than being concentrated in the winner鈥檚 hands. So funding will also be shared among different departments.
Recovery
The Northern Ireland construction industry certainly could do with the shot in the arm that the 拢400m of additional funding will supply - the region鈥檚 building sector has never properly recovered from the 2008 recession.
鈥淭he industry in Northern Ireland took a real battering, probably much more so than other parts of Great Britain and the Irish Republic,鈥� says Wilkinson. Fry estimates that 30,000 construction jobs were lost during the recession, with employment in the sector stabilising currently at around 50,000.
The hard times, which the industry has experienced in recent years, have translated into low margins. 鈥淐ontractors want to maintain their experienced workforces, which means trying to win jobs at slightly lower rates than you would normally work for in the hope that more profitable work will come along down the line. It鈥檚 hard for the market to stop itself,鈥� says Fry.
The Northern Ireland industry鈥檚 big hitters, such as Gilbert Ash and Graham, have responded to these straitened circumstances by targeting work south of the Irish border and on the mainland of the UK. This explains why all those construction professionals have been taking up seats on flights across the Irish Sea. 鈥淭he construction industry has been kept alive on the basis of Tier 1 Northern Irish contractors working in Scotland and Ireland,鈥� says Aecom鈥檚 Wilkinson.
The industry in Northern Ireland took a real battering, probably much more so than other parts of Great Britain and the Irish Republic
Jody Wilkinson, Aecom
Competing in the UK-wide market also enables these companies to maintain a more consistent pipeline than Northern Ireland can offer, thus helping firms to retain talent, says Tim Kinney, head of construction and projects at Belfast-based solicitor Tughans. 鈥淭here鈥檚 been a flow of deals available in the UK, which people are more able to rely on.鈥�
But with 拢400m more work now on the way, will flights in the other direction now be packed with mainland contractors looking to get in on the action? It鈥檚 unlikely. The low-margin nature of the work on offer in Northern Ireland means that those UK-wide contractors that dipped their toes into the province during the noughties have withdrawn, and Fry sees little chance now of big UK companies - who currently have very little presence in the region - wanting to break into the relatively small-scale Northern Ireland market.
This is despite the fact that the construction market in Belfast has performed well recently. Output was down 1.7% in the first quarter of this year, according to Northern Ireland Construction Bulletin figures published last week. However, this figure is still up by just over 7% on the same period last year.
鈥淲e are definitely seeing the market heating up,鈥� says Bruceshaw鈥檚 McIlwaine, who has observed a 鈥渟ignificant change鈥� in the number of cranes on the Belfast skyline over the last couple of years.
A big spur for activity has been the construction of a new campus for the University of Ulster in Belfast city centre. On the back of the 拢250m project, which is being carried out by a partnership between local contractor Lagan and the Portugese company Somague, McIlwaine estimates that there are around 20 student accommodation schemes in the planning and development pipeline.
He adds that a planning application was submitted in March for the third phase of the harbourside City Quays scheme, where accountant Baker Tilly has already taken space and a four-star Marriott hotel is under construction. Meanwhile in Belfast city centre, a 拢400m-plus mixed-use office and residential scheme is being brought forward at the Royal Exchange.
But it is probably too early for Northern Ireland鈥檚 contractors to submit bulk orders for new hi-vis jackets. Fry cautions about the sustainability of this recent growth: 鈥淭here has been a lot of investment in Belfast with student accommodation, hotels and grade A offices but the worry is that a lot is being built out and we鈥檙e not hugely sure about what is coming next.
鈥淭hough there has been pick-up of private sector works in the past couple of years, like the rest of the UK we are somewhat concerned about what is over the horizon.鈥�
Concerns
The biggest worry is Brexit, which weighs heavily on minds in Northern Ireland, given the local economy鈥檚 interdependence with that of the Republic. Fry says: 鈥淗uge amounts of materials and people go across the border every day without any stop or check. Any question mark over movement of materials is not helpful. A lot [of Northern Ireland contractors] do a lot of work in the Republic in education and health, particularly around the border,鈥� says Fry.
Meanwhile, the York Street interchange project itself was subject in June to a legal challenge to the contract award by an as-yet unnamed party, which means that although the tender process is complete, the tender for construction cannot be awarded yet. Add on
the fact the project still needs a detailed design and Fry estimates that the beginning of 2019 is the earliest that the scheme is likely to start on site.
Though there has been pick-up of private sector works in the past couple of years, we are somewhat concerned about what is over the horizon
David Fry, Construction Employers Federation
But the biggest obstacle to getting projects off the ground is the absence of a functioning devolved administration at Stormont, the traditional seat of government. The Northern Ireland executive, which has exercised devolved power in the province under the 1998 Good Friday Agreement, remains suspended since January after the row over the botched renewable heating scheme that the DUP leader Arlene Foster was involved with.
With Northern Ireland鈥檚 political parties unable to agree on a new power sharing arrangement, the secretary of state for
Northern Ireland, James Brokenshire, is in charge, assisted by civil servants. However, Brokenshire has not set a budget this year
since he took over responsibility. And, he told the House of Commons in a written statement earlier this month that he could
not dish out the sums from the deal with the DUP, which he said should be allocated by the executive when and if it is up and running again.
鈥淚 wouldn鈥檛 expect any significant landmark projects to be coming out from the executive in the foreseeable future,鈥� says Tughans鈥�
Kinney, who expresses 鈥済rave apprehension鈥� about the industry鈥檚 short to medium-term prospects in Northern Ireland. 鈥淲ith the absence of the executive and political uncertainty [it] isn鈥檛 as encouraging as [it] could be.鈥�
鈥淲e could be doing without this, because the industry was starting to get itself together again after the recession. A government would be handy: the time it was a joke is long gone,鈥� says Fry.
The construction industry could help Northern Ireland economy beat its looming Brexit blues, but not unless the province鈥檚 feuding politicians can get their act together.
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