Construction Sector:  Outlook

Oral Answers to Questions – in the Northern Ireland Assembly at 2:15 pm on 17th February 2014.

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Photo of Jonathan Craig Jonathan Craig DUP 2:15 pm, 17th February 2014

4. asked the Minister of Finance and Personnel for his assessment of the outlook for the local construction sector. (AQO 5545/11-15)

Photo of Simon Hamilton Simon Hamilton DUP

We are continuing a theme, I suppose.

There is no doubt that our economy is beginning to show signs of recovery.  We have had some encouraging indications that we are beginning to emerge from what has been the deepest and most protracted recession in living memory.  The latest 'Northern Ireland Construction Bulletin' shows that the total volume of construction output here increased by some 2·4% in quarter 3 of 2013-14 compared with quarter 2.  The Northern Ireland construction industry has demonstrated great versatility and resilience, with many firms winning major projects in Great Britain and beyond.  A number of larger local construction firms have indicated that over 50% of their turnover comes from projects located outside Northern Ireland.  The ability of local firms to compete and win work outside Northern Ireland is evidence of the quality of the construction industry here, and that gives me confidence in the future outlook for the industry.

Photo of Jonathan Craig Jonathan Craig DUP

Can the Minister outline what government has done not only to stabilise but to assist the recovery of the construction sector?

Photo of Simon Hamilton Simon Hamilton DUP

What we have done most and perhaps best is continue to invest in infrastructure across Northern Ireland.  We have assisted the construction industry by at least attempting to simplify and streamline the procurement process, as I outlined in response to other questions, and that has helped to reduce costs to the industry and, most importantly, public bodies.  That has maximised the funding available for construction works and minimised delays in having schemes brought forward.

There is still considerable work to be done on speeding up our procurement process for major capital projects, and that is why I have asked the procurement board to carry out a targeted piece of work in that regard.  However, in the biggest areas in which we are spending money on construction works, adjusted for inflation, we are now spending at the same level as we were prior to the 2007 credit crunch and downturn.  Proportionately, public sector investment in construction, which, prior to 2007, was just below 40% of total investment, is now at 54% of total spend, which is testimony to the continued investment that we as a Government are putting in.  However, it also shows the extent of the collapse in spending by the private sector.  It is more of a private sector problem.  I assure Members that all available capital moneys are being spent and that any surplus funding is being diverted into much-needed schemes through the monitoring round process.

Photo of Phil Flanagan Phil Flanagan Sinn Féin

Go raibh maith agat, a Cheann Comhairle.  The Minister's figure of 54% of spending in the construction sector indicates how important public sector expenditure is.  That brings me on to the ISNI portal, which is used to highlight what projects there are for contractors.  Some contractors have indicated that the portal is not as good as it could be.  They accept that it is a good principle, but, for example, some projects are not on it yet.

Photo of William Hay William Hay Speaker

I encourage the Member to come to his question.

Photo of Phil Flanagan Phil Flanagan Sinn Féin

Can the Minister ensure that his Department and others use the portal effectively to benefit local construction companies?

Photo of Simon Hamilton Simon Hamilton DUP

The Member makes a good point about the portal, which is a delivery tracking system that the Strategic Investment Board (SIB) runs on behalf of the Executive.  Obviously, SIB's work is a ministerial responsibility for the First Minister and the deputy First Minister, but it has the potential to be the answer to the problem that the Member identifies, which is a lack of clarity about the pipeline of capital investment moving forward.  I have listened to people in the construction industry who, although they are taking up opportunities for work outside Northern Ireland, say that they are starting to see some pick-up in work here in Northern Ireland, especially in the private sector.  They still want to do public sector work, and we want them to do public sector work in Northern Ireland.  However, as they are meeting other pressures and have to skill up and tool up for projects well in advance, they need good information and a delivery tracking system could and should be able to do that.

The problem, as the Member identified, is that not all Departments have availed themselves of the data tracking system.  There are some Departments whose work is not on the delivery tracking system at all, and there are other Departments who put the information on it sporadically.  So, you are very much getting an incomplete picture for people in the construction industry.  I think that, if we, as an Executive, are serious about giving good and timely information to people in the construction sector, this is a device that we can use.  If we wanted to, we could all do it within a week.  There is no reason why Departments should not be looking at it.  As I mentioned in response to the previous question, I have asked the procurement board to look at this issue and related issues as part of its review of the procurement of major capital projects in Northern Ireland.

Photo of Samuel Gardiner Samuel Gardiner UUP

Minister, there are still significant delays in many government capital projects hitting the ground.  What can be done to improve the situation that we find ourselves in?

Photo of Simon Hamilton Simon Hamilton DUP

Of course, one of the biggest capital projects not to proceed over the past couple of years is the A5 road project.  The Minister for Regional Development, Danny Kennedy, was responsible for that project and fell foul of the courts in the process leading towards it materialising on the ground.  There are lessons for all of us to learn from that.  One of the lessons that, I hope, we learn and something that, I hope, the subgroup of the procurement board will look at closely is how we create a pipeline of work so that, in a situation such as that with the A5, where a significant amount of money could not proceed — roughly £100 million last year and £115 million this year could not be spent on that project — a sufficient volume of projects have advanced to a stage at which they can avail themselves of that funding if and when it materialises.

Obviously, we hope that the sort of situation that arose with the A5 does not happen again and that all major capital projects that we want to deliver are delivered.  However, as we know, whether through planning or falling foul of the courts, as Minister Kennedy did with the A5, that is not always the case.  There need to be other opportunities to soak up that money.  If we do not have an opportunity to soak up that money, the funding will be lost to Northern Ireland, and our people will lose out as a result.