Things fall apart

Last month, Building magazine ran an interesting and informative feature on the state of the construction sector in Scotland (Scots on the rocks, 3 August). As the article pointed out, Scotland stands out as a country that has grasped the nettle in taking an innovative approach to boosting the sector.

The sector in Scotland is set to enjoy record levels of investment over the next few years and will grow 20% by 2014, while the Scottish Futures Trust (SFT) has been at the forefront of developing innovative finance initiatives to plug the infrastructure spending gap.

SFT has been supporting a projects portfolio of £9bn, including 67 new schools, three new colleges and over 1,000 new homes while delivering £131.4m of savings and benefits in 2011/12. Given the impact of the construction sector’s decline on recent GDP, it can only be assumed that a resurgence will have the inverse effect. 

The result of this ad hoc approach is Northern Irish contractors are forced to seek work elsewhere, and levels of construction output are around 40% lower than the peak output in 2007

Speaking from a Northern Irish perspective, we can only cast admiring eyes at the response of the industry and the Scottish government to the financial crisis, and its subsequent impact on construction.

Several major projects in Northern Ireland have fallen victim to the pervasive economic turmoil. Perhaps the most high-profile example of this has been the collapse of an £800m project to build a road linking Dublin to Londonderry in November 2011.

The apparent death of this project has highlighted two points: first, that the Republic of Ireland’s woes have had a far-reaching impact on the construction sector north of the border.
Second, although the Northern Ireland Executive has pledged its commitment to the project, no plan has been put in place as to how it will spend the £400m which the Financial Times reported in November it had allocated to the road project. Many find this lack of transparency a source of frustration.

In 2004 then finance minister Ian Pearson announced a 10-year framework that was designed to deliver up to £16bn of investment into Northern Ireland’s ailing infrastructure after years of under-funding. This came at a time when the Strategic Investment Board for Northern Ireland - a body developed during the Tony Blair/Gordon Brown era - was making significant progress in delivering projects such as the DBFO Roads Packages 1 (M1/Westlink and M2) and 2 (A1 and A4), the Alpha water and Omega wastewater projects - not to mention a number of Belfast schools.

Gone are these halcyon days; today we have creaking infrastructure, no pipeline and, it seems, no plan.

Although there are some ongoing PPP projects in the waste sector and a number of traditional build schemes, there is no transparent and centrally driven pipeline.

The result of this ad hoc approach is that Northern Irish contractors are forced to seek work elsewhere, and current levels of output in the Northern Ireland construction industry are around 40% lower than the peak output in 2007.

Many believe that the Strategic Investment Board should be allowed to formulate a clear and centrally managed pipeline of projects. To achieve this however, it must have the backing of a government with a serious commitment to infrastructure spending. There was palpable disappointment around the absence of this type of political commitment when the Northern Ireland Executive launched its latest Programme for Government. 

While our friends across the Irish Sea are getting on the front foot by speaking to investors around the world and developing pioneering models which will, at the very least, mitigate the impact of the economic downturn on contractors, our own politicians need to follow suit and push infrastructure up the political agenda. The irony of finding a Northern Irishman (Barry White) at the helm of the Scottish Futures Trust is not lost on us.

Adrian Eakin is a partner in the Belfast office of international law firm Pinsent Masons. Donna Cooper of Pinsent Masons is thanked for her assistance with this article