Northern Ireland had a ‘normal’ year in 2023 with more stability and predictability than in the volatile preceding years, according to a new construction report.
While public infrastructure investment was stymied by ongoing political inertia last year, the private sector performed well and total construction volume output rose by 7.8% year on year, said infrastructure consulting firm AECOM in its annual review.
Tender price inflation in NI rose 9% over the course of last year, meanwhile, but is expected to ease over the course of 2024 to an average of 3.1%.
Housing output remained strong in 2023 with an increase of 15.1%, mostly in public sector housing stock. House prices increased by 2.3% over the 12 months to August 2023, making NI the best performing region in the UK, where prices fell by around 5%.
Retail activity was busy, 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 NI, said AECOM.
Vacancy rates are also dropping across NI, and particularly in Belfast. AECOM said 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.
Published prior to the reinstatement of devolved government in NI on February 3, AECOM’s review identified inaction at Stormont as a barrier to growth preventing key strategic decisions on the country’s infrastructure and slowing down the pipeline.
However, the Windsor Framework coming into full effect on October 1, 2023 had provided a clear path for NI to trade with the UK, while also staying in the EU single market.
In the 12 months to the end of June 2023, total construction volume output in Northern Ireland was up 7.8% year on year.
Growth was primarily driven by repair and maintenance work, which in 2023 saw a year-on-year increase of 17%. Infrastructure saw an increase of 9.3%, slowing to only 2.6% in the last quarter.
Tender price inflation in Northern Ireland rose 9% over the course of last year, down from 2022’s figure of 12%.
Overall material and labour costs are still rising, said AECOM, but at a much slower rate than over the past two years and at a lower rate than general inflation within the wider economy. While the type of projects and composition in costs between labour and materials will change, tender price inflation is expected to continue to ease over the course of 2024 to an average of 3.1%.
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.
“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.”
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