Scottish construction remains resilient despite Brexit uncertainty

Scotland’s construction smalland medium-sized (SME) firms are remaining stable in the face of continuing political uncertainty, according to the Federation of Master Builders (FMB) Scotland.

Key results from the FMB’s latest State of Trade Survey, which is the only quarterly assessment of the UK-wide SME construction sector, include:

• The pace of growth among Scotland’s construction SMEs remained the same in the final quarter of 2018, compared with Q3 2018; • 42 per cent of builders have detected signs of a weakening housing market;

• One in five construction SMEs have had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks; • Carpenters overtake bricklayers as the trade in shortest supply with nearly two-thirds (64 per cent) of construction SMEs struggling to hire carpenters and joiners and 61 per cent struggling to hire bricklayers; • 87 per cent of builders anticipate that material prices will rise further in the next six months, slightly up from 86 per cent in Q3 2018; • Two-thirds (66 per cent) of construction SMEs expect wages and salaries to increase over the next six months, up from 58 per cent in the previous quarter.

Gordon Nelson, director of FMB Scotland, said: ‘There was no change to activity levels reported by Scottish construction firms in the final three months of 2018. Although not overwhelmingly positive, these results demonstrate the strong resilience of the sector in Scotland, given the significant barriers firms are facing. Now is no time for complacency, however, and Scottish firms have much to contend with. Not least, building firms across Scotland are facing problems accessing the finance they need to build. This latest research shows that a worrying one in five construction SMEs have had projects stalled in the past three months due to delays to loans, or loan refusals, from the banks. The only light at the end of the tunnel here for Scottish construction firms is the Finance Secretary’s welcomed move of recommitting the establishment a Scottish National Investment Bank. The bank will provide much needed finance to small building firms.’

Mr Nelson continued: ‘The growing political uncertainty is also starting to have a noticeable effect on Scottish firms. Political uncertainty goes hand in hand with low levels of consumer confidence and if consumers are less confident, the building industry suffers. Homeowners are the lifeblood of the local builder who relies on people commissioning new-builds, extensions, loft conversions and new kitchens and bathrooms. Indeed, this new research shows that nearly half of builders reported signs of a weakening housing market in the final quarter of the year. Consumer confidence may well take a further hit in Scotland if the divergence between the income tax regime in Scotland and the rest of the UK will continues to grow. We will await to see whether this dampens consumer and investor confidence as 2019 unfolds.’