Construction businesses in Northern Ireland going offshore for work
The construction industry is actively seeking business to rebuild its order books and is now heavily reliant on gaining contracts for NI businesses, but with the work located outside NI.
Skilled construction workers are being offered jobs that mean they must regularly travel outside NI to work.
In the list of the 100 most profitable businesses in Northern Ireland published next week, 15 are either directly or indirectly dependent on construction and civil engineering activity.
The detail of the annual turnover and profits figures does not give a breakdown of the location of the main contracts, but the reliance on external work is widely acknowledged.
The business data from the 10 largest construction firms is encouraging. Total turnover for the 10 in the latest year, usually reliant on business in 2017, exceeds £2.2bn and importantly is 17% higher than in the previous year.
Many of the 10 make no secret of the large-scale contracts which they have signed, particularly in Great Britain.
The other feature from the 10 largest construction businesses is that they are trading profitably. With combined pre-tax profits of nearly £104m, the performance is creditable. A gross margin of over 4.6% is reassuring.
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The turnover and profits figures are only a partial description of the state of the construction industry. There are evolving difficulties. Construction activity, recently, peaked in the third quarter of 2018. This followed a period of recovery from late 2013 until 2017 as the sector recovered from the recession in the wider local economy. Even in late 2018, construction activity was still nearly 20% lower than in 2008.
Prospects for 2019 are subject to serious degrees of caution. There are several interdependent problems.
An uncertain Brexit agenda, the absence of a functioning devolved government and a housing market which is operating with degrees of instability: all point to a cautious approach. The workload prospects in Northern Ireland, as assessed by the CEF (Construction Employers Federation) are worrying.
The uncertainty about the Brexit negotiations has become something more than a debate on the merits of Brexit.
An incomplete and uncertain Brexit makes the negative impact stronger. The goodwill that should have secured a continuing open trading relationship on this island has virtually disappeared.
The good intentions of the 'backstop' in the negotiations have been badly misunderstood and opposed by agencies that have not appreciated what the UK and Irish Governments are trying to do.
The absence of a forum for decision-making at Stormont has been only inadequately understood. Would the North-South Interconnector, now overdue, have had an agreed launch if a ministerial decision were available? Should the Belfast transport hub have made better progress to get work started? Why has the Belfast Westlink traffic management scheme made so little progress? Where is the decision-making momentum for the A5 road scheme?
Possibly even more significant, why has the City Deal concept taken so long to be converted into the first steps of an action plan, both in the Belfast region and in the north-west? Why is there so little concern about the inadequacies of house-building efforts leaving too heavy a reliance on the housing associations to build enough new housing where it is socially needed?
The construction industry has adapted well to a local marketplace that is in a disorderly state. The price of this unstructured approach is an unnecessary penalty.
Company report: W&R Barnett
W&R Barnett is one of Northern Ireland’s leading private sector, family-owned businesses, headquartered in Belfast but with subsidiary business units in Great Britain and several other countries.
The group is a major international grain trader. The group also trades in derivatives, oils and molasses;the operation of dockside facilities; manufacturing animal feeds; and also specialises in horse breeding.
In addition the business manufactures corrugated board, and is involved in the design and manufacture of corrugated cases and packaging solutions. In May 2018 the group, through a subsidiary, Logson Holdings, purchased the Braeside Group for just under £11m, which is also involved in the design and manufacture of corrugated cases and packaging. The group has controlling interests in other Northern Ireland trading units in the animal feedstuffs sector including R&H Hall, James Allen & Co, North West Silos, West Twin Silos and BHH Ltd.
The group owns or has shareholdings in 80 trading subsidiaries, many of which are registered outside the UK.
Operating and pre-tax profits for the year to July 2018 recorded increases of 10% on the previous year. Employment in the group averaged 1,567 people in 2018, an increase of 6% compared to 2017.
Shareholders’ funds were valued at £363m in July 2018, up 15% from a year earlier.
In October 2018, after the end of the last financial year, the group purchased and cancelled over 15,000 ordinary shares from the shareholders for £47.8m in a restructuring of the overall ownership structure. William Barnett remains the ultimate controlling shareholder.