Scottish builders stand resilient despite ‘significant headwinds’

Scotland’s small and medium-sized construction firms enjoyed strong growth in the second quarter of 2018 despite significant headwinds, according to the Federation of Master Builders Scotland.

Hundreds of jobs were lost during the last few months as Bonnyrig-based multi-disciplinary construction company Crummock was placed into receivership followed by the collapse of Paisley-based Lambert Contracts Ltd and T Graham & Son (Builders) Limited from Dumfries and Galloway.

However, key results from the FMB’s latest State of Trade Survey found that the performance of small and medium-sized firms (SMEs) rose by 17 percentage points in the second quarter of 2018 to +24%. The performance indicator, which is the only quarterly assessment of the UK-wide SME construction sector, measures workloads, enquiries and expected workloads.

The workloads for SME builders also rose, with the proportion of firms that reported higher workloads growing compared to Q1 2018 (41% vs. 32%).

However more than three quarters of builders said they expect material prices to continue to rise while more than half of firms (60%) struggling to hire carpenters and joiners and 45% struggling to hire plumbers.

Gordon Nelson, director of FMB Scotland, praised the resilience of the sector but issued a warning to the Scottish Government over the “unintended consequences” of its latest policy proposals and warned that the “economic uncertainties” of Brexit loomed.

Gordon Nelson

He said: “The second quarter of this year carried a lot of bad news for the Scottish construction industry with the loss of hundreds of jobs after some well-known firms collapsed. However, beneath these headlines, the outlook for most small construction firms has remained relatively bright.

“The positive reports from construction SMEs in the first quarter of 2018 have not only been sustained into the second quarter, they have improved significantly. This performance is all-the-more remarkable considering the serious headwinds facing the sector. As our research demonstrates, rising material costs and the scarcity of skilled tradespeople continue to batter what is proving to be a highly resilient industry, at the same time as the economic uncertainties of Brexit loom just around the corner.

“However, this resilience will not last indefinitely and the Scottish Government needs to ensure that the industry is not knocked off its stride by the unintended consequences of its latest policy proposals. The recent publication of the Scottish Government’s consultation on implementing the Barclay business rates review has already rung alarm bells. The proposed new tax on out-of-town businesses is set to apply to all firms, and could conceivably hit small construction firms with offices and storage facilities located on the outskirts of towns.”

Mr Nelson added: “In addition, many builders are concerned about the direction of the Planning Bill with an amendment on third party, or ‘equal’, right of appeal expected to come forward. If this does emerge, it would exacerbate the current planning delays experienced by builders and heap significantly more risks upon their businesses. Small construction firms are the backbone of what is a key industry for Scotland’s economy. The Scottish Government must make sure it is not unintentionally shackling them.”

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