They warn that if left unaddressed previously sustainable businesses could fail and lead to major workplace lay-offs.
A survey of 80 Northern Ireland-headquartered construction firms with a combined turnover of £1.5bn per annum reveals the industry is reeling from unrelenting cost increases and fluctuating supply-side problems. Nearly a third reported it risked the survival of their businesses.
Now firms are calling for contractual clauses to be reintroduced into public works contracts to acount for inflationary pressures.
The Construction Employers Federation State of Trade Survey covering the first six months of this year revealed that firms are now unlikely to bid for public work under present contractual arrangements.
CEF key findings
- 30% reporting risk to the survival of their business as a result of materials shortages and unsustainable cost increases
- Without government action on costs, 89% are less inclined to bid for public contracts. 48% of which significantly less inclined, 4% withdrawing
- All respondents impacted by rising material costs. 78% seriously impacted, 38% critical
- 98% reporting material shortages. 69% of which serious, 30% critical
- Materials in shortest supply: Timber; Steel; Plastic/pipes; Roofing; Doors/windows/glazing
- 71% are reporting lower profit margins than 2019/20
- 75% are operating at full or nearly full capacity
Mark Spence, Managing Director of the Construction Employers Federation, said of the survey: “While the immediate impact of the onset of the pandemic in March 2020 was tough, it is the challenges on materials supply and cost increases in the last few months which are bringing to the fore much more fundamental questions about business survival.
“In our urgent discussions with government, we have requested that they speedily consider these matters to allow pragmatic decision making and prevent a seizure in our local pipeline of public contracts.
“We have also urged the inclusion of inflationary mechanisms in all new contracts to provide cover for such situations now and in the future.”
He added: “This is because the procurement model upon which we have relied upon has been shown to no longer be fit for purpose – contractors in GB have contractual remedies in their contracts which NI procuring bodies have seen fit to delete or chose not to include.
“CEF has demanded their reinstatement and a more robust contractual model to take us forward, future-proofed for any future ‘unforeseen’ series of circumstances.
“We are working together to manage a scale and range of risks that only eighteen months ago would have seemed fanciful and unnecessarily dramatic”, said Spence
“This is a moment of immense challenge that we can already see far eclipses the one-off price increases after the 2016 Referendum and the immediate impact of the onset of the pandemic combined. While the reasons for it are many and varied, the on-the-ground reality is of a sector that urgently needs supported in order to remain sustainable”.
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