Growth in Construction Sector accompanied with warnings of difficulties ahead

19 July 2021 
2 minutes

It has been widely reported that Northern Ireland’s rate of growth in output continued in June, albeit at a slower pace than in May. One of the key performing sectors was the construction industry. However, as anyone who has recently had construction work carried out knows, the rising demand and disruption to supply caused by Brexit has increased supplier delivery times and increased costs, which so far have been accepted by the customer. It seems likely however that the supply chain issue and inflationary pressures will continue for some time yet.

Whilst growth is often welcomed in the short term, the long-term effects of the material shortages and associated price rises of raw materials means that the construction sector faces uncertainty and pressures, which if they continue unabated, may threaten what are otherwise well-grounded, long established and sustainable businesses. Given the difficulty in predicting how long this will continue to be accepted by customers or indeed funders, it is crucial that those involved in such business take steps to protect themselves for uncertain times ahead.

With inflation on the rise generally, it is possible, notwithstanding the Bank of England’s recent hold on interest rates until the economic outlook is more certain, that interest rates will rise in the longer term. Pressure has been growing on the Monetary Policy Committee to signal when interest rates will rise in response to higher levels of inflation. In the event of interest rate rises this in turn will have an impact on both customers and suppliers. Added to this as the post-Covid boom slows down generally, economic growth is expected to moderate in 2022.  As such now is the time for businesses to plan ahead and also to consider what alternative options remain open to them in the event of a potential future downturn in the sector.

If you or your business is affected by any of these issues or require assistance please contact our Insolvency team to discuss.

This article is for general guidance only and should not be regarded as a substitute for professional legal advice.

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