Northern Ireland construction leaders highlight the urgent need for political leaders to agree 2025/26 Budget to boost the struggling sector

A new survey from the Construction Employers Federation (CEF) has highlighted the urgent need for Northern Ireland's political leaders to agree on the 2025/26 Budget to boost the struggling construction sector.

The survey, which gathered insights from Northern Ireland firms with a combined annual turnover of around £2.8bn, paints a picture of a sector grappling with increasing financial pressures, skills shortages, and a deteriorating infrastructure system – particularly concerning water and wastewater.

Key findings from the 2024 survey, which reflects the challenges that contractors, civil engineers and homebuilders are currently facing, show mixed performance across the sector. While 35% of respondents reported a turnover increase of at least 10% in 2024, 30% saw a decrease of 10% or more compared to the previous year.

Profit margins also presented a concerning trend, with 40% of firms saying their margins were worse than in 2023, while only 25% reported improvements. In a worrying signal of the sector’s fragility, just 65% of firms were operating at full or near full capacity in the past year.

The survey also flagged a growing skills crisis in the construction sector, with industry leaders identifying four main priorities to address the issue:

Promoting Construction Careers – Attracting new talent by raising awareness in schools and communities about career opportunities in construction.

Targeted Training – Identifying the specific skill needs of the industry and tailoring training programs to address them.

Entry-Level Training – Developing more entry-level skills programs to feed into the industry.

Clear Career Pathways – Enhancing understanding of how to enter and progress within the construction sector.

The persistent challenge of inflation continues to affect businesses, with 75% of respondents reporting moderate inflationary impacts, while 15% indicated serious concerns over its financial effects on their operations.

However topping the industry’s priority list for 2025 is for the NI Executive to deal with the decades of underfunding of the region’s water and wastewater infrastructure, which has reached a critical point.

With Northern Ireland Water (NI Water) struggling to meet growing demand, the lack of adequate capital investment continues to stifle economic growth, particularly in sectors like homebuilding and manufacturing. The survey’s participants expressed alarm over the ongoing underfunding, with an estimated £500m shortfall in the capital budget for NI Water between 2023 and 2026.

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Mark Spence, chief executive of CEF, stressed that the sector is facing a fragile period as the year progresses: "Our construction survey's results reflect a period of increased challenge during the second half of 2024.

"Chiefly this was seen through a year-on-year drop in turnover and profit margins at a level that has not been seen since the first half of 2021. Coupled with a drop of 20% in the number of firms reporting full or almost full order books, there is clear evidence of a fragility in the market which many in the sector attribute to a declining pipeline of public sector works and the underfunding of enabling infrastructure such as water.

"With the NI Executive’s draft 2025/26 Budget now out for consultation, the industry is clear that its urgent finalisation is paramount as this will give all Government clients the certainty they need to plan out their investment pipeline over the coming 12 months.

"However, the NI Executive must again take this opportunity to reflect on how far its budget can actually deal with the social, economic and environmental challenges that face us. While year-on-year increases in the draft allocations for the Departments of Infrastructure, Communities, Health and Education are to be welcomed, a lot of this is accounted for through already ring-fenced flagship projects such as the A5, Strule Shared Education Campus and the Mother and Children's Hospital.

"Each of these projects stand on their individual merit and the industry fully backs their delivery, however, the draft allocation to the Department for Infrastructure once again makes it impossible for the Department, and wider Executive, to allocate NI Water's full Price Control need of over £600m of capital investment in the coming year.

"While the Infrastructure Minister and NI Water innovatively used an additional £19.5m in last October's Monitoring Round to unlock the stalled connection of some 2,300 newbuild properties to our water and wastewater network, the draft Budget would mean that over the course of 2023-2026 NI Water's capital budget would be underfunded by approximately £500m against identified need. That will continue to have a devastating impact on our ability to build new homes, enable businesses to grow through investment in facilities such as factories and meet our undoubted environmental challenge.

"As we move towards the UK Government's Comprehensive Spending Review and the opportunity this will present the NI Executive to agree a multi-year budget for the first time in over a decade, we believe now is the moment to properly address the decades of underfunding of our water and wastewater network through an independent review of NI Water's governance and funding model, as recommended by the NI Audit Office in 2024, ensuring that this issue stops being the inhibitor to economic growth and accelerant of environmental decline that it currently is".