Proposals are to be brought before the Executive aimed at mitigating delays and rising costs of construction materials brought about by Brexit.
he latest Ulster Bank Purchasing Managers Index (PMI) showed that construction firms here experienced the worst quarter for inflationary pressure in the PMI’s 19-year history. The prices of some materials have skyrocketed by as much as 400%.
Due to global supply chain issues as a result of the new Brexit arrangements that came into effect on January 1, companies here, particularly construction and retail, have had to raise their prices accordingly.
Finance Minister Conor Murphy was recently asked about how the issues are impacting the delivery of major capital projects.
Mr Murphy said Covid pandemic restrictions, increased investment in infrastructure internationally and widespread increases in home improvements, are leading to shortages, delivery delays and escalating costs for certain construction materials and products.
"These market conditions are beginning to impact on the delivery of major projects," he said.
"To ensure that construction projects, which are vital to the delivery of public services and wider economic recovery, are not unduly impacted, my department has consulted with construction industry representatives on the development of proposals aimed at managing the impact of delays and sharing the risk of material price volatility.
"These proposals will require Executive consideration."
Alliance infrastructure spokesperson, Andrew Muir, said: “With construction costs rocketing and the likely impact on key public sector projects underway or about to start, this issue is of increasing concern.
"Unless costs stabilise or fall back, much-needed investment and projects will be placed in peril just as we need to be driving a Green Recovery, building back better after impact of Covid-19.
"I look forward to hearing more from the Finance Minister on what he intends to do to tackle this emerging problem which will cause serious delays, non-starts and cost overruns without strong and immediate intervention.
"The fact that £30 million of capital monies remain unspent may help the issue but won’t, I worry, plug what will fast become a big issue of real concern unless prices readjust and matters soon rectified."
Earlier this month, the Construction Employers Federation (CEF) said that nearly all construction firms here are running short of materials and price increases are putting jobs and companies at risk.
CEF carried out a ‘state of trade’ survey of 80 firms with a combined turnover of £1.5bn in May and nearly 80% of the firms reported that they were seriously impacted by rising material costs, while for 38%, the hit was 'critical'.
Mark Spence, managing director of the CEF, said many public sector construction tenders do not take into consideration rising raw material costs, or other unforeseeable changes, in the overall agreed tender value.
"This is a vital concern for future pipelines of public sector work as all budgets previously agreed will no longer give cover to the procuring authority to commit public funds," he said.
“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.”
