Hopes, challenges and opportunities: industry faces “unprecedented” tests in 2018

2018 will be a year of exceptional challenges – and also opportunities – for the Scottish construction sector.

Project Scotland recently asked a wide range of industry professionals to share their hopes and thoughts on what lies in store over the next 12 months.

Brexit, skills shortages, the rising cost of materials, ambitious government housing targets, the on-going uncertainty around training, SMEs struggling to gain access to finance and potential changes to building regulations in the wake of the Grenfell Tower tragedy in London are just some of the issues gripping the nation’s construction firms at present.

The picture is far from all doom and gloom, however. There is much to celebrate and aspire to, including pioneering apprentice programmes taking place, more diverse workforces, increased collaboration, innovation, ground-breaking offsite manufacturing processes and investment in our university cities and infrastructure.

Here is a round-up of comments on what lies await in 2018.

Bruce Dickson

Bruce Dickson, regional director BAM Construction

As we move from 2017 into 2018 it’s fair to say that the construction industry is facing unprecedented challenges. Some are long-term health issues, such as our productivity dilemma. Then we have what was recently eloquently described by leading Scottish industry figures as the ‘procurement cesspool’ and – the most self-inflicted wound of all – sub-prime bidding to shore up order books in the face of faltering demand.

Hanging over our heads is the uncertainty over how Brexit will impact on what was already a full-blown skills crisis and the question mark over the future direction and shape of the CITB. I recently said that asking for a safer, sustainable and profitable industry is the equivalent of wishing for world peace.

Events in the last two years, such as the Edinburgh schools, where we already know the cause thanks to Professor Cole’s report, and more recently the Grenfell Tower disaster where the full causes have yet to be determined, have sent shockwaves around the industry. They highlight that business as usual isn’t working.

The recent passing of Sir Michael Latham, a truly inspirational figure, caused me to query how much has actually changed since 1994. We still design, procure and build in the way that so many influential industry observers tell us doesn’t work. The Scottish Government will shortly be publishing the guidance to deliver outcomes from the 2014 Procurement Review. My hope for 2018 is that this is sufficient to start us on a path to that safer, more sustainable and profitable industry.


Gordon Nelson

Gordon Nelson, Federation of Master Builders Scotland director

Our main hope for 2018 is that the construction industry in Scotland is viewed by the Scottish Government as a strategically vital industry. As without it, we won’t be able to meet their targets for the delivery of new homes, maintain and refurbish our existing buildings and develop new infrastructure projects. Whilst 2017 was not without its challenges, the FMB’s state of trade surveys indicated that workloads and enquiries have held up for our members in Scotland. Long may this continue.

We want the Scottish National Investment Bank to be set up so that it can effectively support the needs of construction SME’s. These smaller firms find it particularly difficult to access the finance they need to grow and a new finance stream could be a big difference. This is especially the case to attract and support new SME housebuilding firms.

Statistics from the Office for National Statistics (ONS) Labour Force Survey reveal that the Scottish construction industry currently employs almost 16,000 people aged 60 or over. In 2018 we need to inspire, attract and retain more apprentices to the craft trades as well as other talent to the wide range of career pathways available in our industry.

This is why the FMB and six of the construction industry’s major trade bodies have set out what we believe to be the sector’s responsibilities and requirements in a post-Brexit labour market. The ‘Construction Industry Brexit Manifesto’ commits the sector to doing much more to recruit and train additional UK workers to reduce its future reliance on migrant labour. We know this will not happen overnight and that, for some time, there will be an ongoing need for significant levels of skilled EU workers.


Michael McBrearty

Michael McBrearty, chief executive, hub South West

Scotland has seen significant infrastructure growth over the past five years with the development and delivery of large scale road and social infrastructure projects. The challenge for next year and beyond will be the retention of skills as projects draw to a close and the pipeline of new work diminishes.

There will be competing demand for these skills across the rest of the UK as the UK Government brings large infrastructure projects to the market. This could impact on the appetite to continue investing in Scotland. With diminishing capital budgets the Scottish Government needs to find an alternative off-balance sheet funding structure which is politically acceptable.

I would like the Scottish political parties to approach the issue of Scottish infrastructural investment on a long-term, strategic, consensual basis that can be sensibly programmed free of party politics. This will ensure that we can invest in skills over the long term and, as a result, increase productivity.

Housing will be a big focus if the Scottish Government is to meet its targets of 50,000 homes in five years and will call for an even greater need for planning in the market to ensure the resilience and capacity of the supply chain.

Meeting the housing challenge will demand a wider utilisation of technology and offsite manufacturing. It would be good to see local authorities coming together to optimise economies of scale and I would argue that the hub model could be the catalyst and delivery partner to address and overcome these challenges.


Allan Callaghan

Allan Callaghan, managing director of Cruden Building

While there is no doubt that the construction industry has faced significant challenges throughout 2017, including economic and political uncertainties, the housebuilding industry in particular, currently remains resilient.

At Cruden Building, we are seeing continuing confidence in the housing market, with strong sales across our new housing developments. Similarly, aspiration and demand for affordable housing is also rising from housing associations and local authorities alike in a bid to address the identified housing shortfall. We are currently working on live projects which will deliver in excess of 1,300 new homes in the west of Scotland, across all housing tenures. Key to delivery of the government targets for affordable housing, and the social housing target within this, are the need to implement a renewal of the Help to Buy programme to support sales for customers, with continued complementary grant support measures. Investment in planning and other statutory approvals has to be addressed in order to provide a resource to deal with all applications and not stifle development with long lead in times to start construction.

This potential boost in activity has to be viewed against a backdrop of increased specifications for performance, the trailed effects of Brexit creeping in, as large pan-European suppliers to the building industry are warning that material costs could rise by around 15 per cent, and the potential skills shortages within the industry. This will put construction companies under huge cost pressures to deliver more with less.

Clients need to recognise this and address pricing and the industry needs to continue engaging multi-skilled staff to focus on sustainable, steady growth in order to achieve long term success. At Cruden, we continue to invest heavily in our skills academy to do exactly that – delivering best practice training and education as well as an award winning modern apprenticeship programme, this also needs clarity on the support funding mechanisms going forward with CITB & the Apprenticeship Levy Schemes. We also developing innovative construction methodologies and specifications to meet the challenges of driving forward housing standards within a budget.

I’ve no doubt the construction sector will continue to weather the storm and Cruden in particular will continue our steady and sustainable growth as we go into 2018 and beyond.


Lesley McLeod

Lesley McLeod, chief executive of the Association for Project Safety (APS)

Brexit is the elephant in the room that will grow as 2018 goes on. At the moment, there remains a sense of unreality about Britain’s withdrawal from Europe as negotiations seem bogged down in politics, logistics and endless discussions. But, as the new year waxes and wanes, construction will need to get business-ready for the major changes the country faces.

For members of the Association for Project Safety (APS) Brexit highlights more immediate challenges. It didn’t take the government to identify house building and infrastructure as key to providing a strong basis for the country’s people and its economy but it was a good sign that the political will was underpinned by financial commitment outlined in the autumn Budget.

For APS members, and our clients and colleagues across construction sector, it will not be enough to find the money and the – still too often – manpower to build homes and offices, roads and rails. This would be challenge enough but we also must ensure breakneck-building does not become just that.

Attaining the country’s infrastructure milestones must not be measured in the tombstones of its workers. Too many people still lose their lives on building sites or have their health blighted by work in construction. People must have the skills, knowledge and experience to deliver functional, high quality – even beautiful – structures without unnecessary risk to life, limb and long-term health.  Now, and in 2018, APS is determined to provide the direction and support to deliver necessary speed – and to do so safety.


Craig Bridges

Craig Bridges, regional development director, GRAHAM Construction

Parties involved in the construction industry are increasingly focused on their projects being more than just a building, with growing emphasis on the wider impact that investment in construction and infrastructure offers. But I believe that should be stepped up to a higher level in 2018. Future skills shortages can and must be addressed by our industry. Where projects are being carried out in areas of deprivation, construction offers a unique employment opportunity.

An increased focus is also required on the legacy of the projects being delivered, and on engagement with schools. Additionally, a strategy of directly employing apprentices is needed, as well as the setting up of graduate programmes and other initiatives to equip young employees with the skills they need for a long and successful career in construction.

While we are on the subject, it’s important that construction companies allow apprentices to serve out their time, rather than discarding them in favour of new ones taken on to fulfil KPIs – as sometimes happens. Programmes such as the 5% Club, an organisation consisting of companies committed to ensuring 5% of their workforce over the next five years is comprised of young people on structured learning schemes, are a start – but that figure has to be higher, as my company has already recognised.

Wider communities must benefit from construction investment. Increased engagement with local supply chain organisations should in theory provide a more sustainable approach to delivering projects, and must be central to procurement approach.


Malcolm Thomson

Malcolm Thomson, sales director at Scotframe

It is great news that the Scottish Government is planning to spend £3 billion by March 2021 to deliver at least 50,000 affordable homes, 35,000 of which will be for social rent. It is a welcome step in the direction of everyone having a good quality home.

But quality is the key issue and the recent divergence from a fabric first approach to a greater reliance on renewable energy is something which I hope will be addressed  as the building programme progresses.

Fabric first maximises the performance of the components and materials which make up the building fabric. This reduces capital and operational costs as well as improving energy efficiency and cutting carbon emissions. Offsite panel systems, such as Scotframe’s Val-U-Therm PLUS® have proven their value in maximising airtightness, use of insulation and the thermal performance of the building fabric.

However, currently there is less importance given to the fabric when achieving building regulation compliance, with a basic fabric supported by renewables, such as solar and PV panels, which may not be used efficiently by consumers being all that is needed to achieve a pass. Fabric first building systems can be pre-manufactured off-site, providing reduced labour costs and less construction time, as well as better performance and quality. Their increased use would take a significant amount of pressure off renewables and would ease the skills shortages we currently are experiencing.

It would also shift cost savings from developers to end-users – something that should seriously be taken into consideration.


Willie Watt

Willie Watt, Past President of The Royal Incorporation of Architects in Scotland (RIAS)

Having spoken to literally hundreds of architects and other consultants public procurement and all the ills which flow from that remains their key concern and indeed there is a palpable anger. Too many practices are locked out, the system costs practices and the public sector too much, and the system is placing a huge downwards pressure on fees, whilst belittling real quality.

Whilst much has been talked about regards procurement reform, architects feel that those reforms are yet to deliver any real benefit to consultants and indeed things have arguably got worse with the rise of Open Tendering and the use of ESPD (European Single Procurement Document). It is simply too difficult for Scottish practices to work in Scotland, to grow and thrive. Such a situation must change if we are to create a smart, cutting edge, vibrant industry which contributes to Scotland’s communities, rewards staff and contributes to an export economy.

Of course these tribulations are further exacerbated by the ongoing shadow of the recessions across so much current public sector work because hub projects are still utilising percentage fee caps tendered in the depths of recession, whilst slim fees are often deferred to the end of prolonged stages. Large frameworks and indeed perhaps overly large frameworks continue to skew the market, weighing down recovery whilst the role of the architect and consultants is much diminished.

There is promise in the desire to reform public procurement, to reform hub fees, to review the appropriateness of frameworks and to reconsider design and build. Indeed there have been some reforms, but they have often been so forensic it is difficult to see if they will benefit the professions. Alas for many architects and consultants real positive change cannot come soon enough. Things have to change because too many practices are hurting right across Scotland.

Calum Murray

Calum Murray, director, CCG (Scotland) Ltd

The construction sector has certainly seen its fair share of ups and downs over the past decade but I am optimistic about 2018 and what it will bring. Housing is a top priority for the UK and Scottish Government and in Scotland there is a commitment to build 50,000 affordable homes by 2021. There is plenty of work to be done to ensure we achieve that target and we at CCG believe we are pushing boundaries to stay ahead of the curve both in our approach to innovative construction technologies and skills development.

Our capabilities in off-site manufacturing is our USP and gives us the mechanisms to help achieve these targets. At present, we create around 850 new homes every year using this design-for-manufacture approach which has a huge number of benefits to us as a contractor and to our clients including flexibility in design, an assurance of quality, enhanced thermal properties, and when on-site, rapid site erection, essentially improving the delivery, long-term performance, thermal efficiency and sustainability of the finished home. What is key is that we work together with planning departments and local authorities to ensure we deliver houses that are suited to their needs, timescales and budgets but we must be able to get to site faster in order to truly benefit from Modern Methods of Construction.

Approximately 80% of affordable houses in Scotland are now being constructed using timber frame and the scope and potential for growth using timber is tremendous. It is vital that we continue to think ahead and invest in new and emerging techniques and technologies. We have a have a major skills shortfall arising from past failures to train Scottish citizens so we must put training at the forefront of our thinking. Brexit will accentuate this as we lose labour that we have come to depend on so heavily in the housebuilding industry.

Innovation will be key to the future of the sector, and it is an exciting time for Scotland to be at the forefront of this industry. It would be fair to say that the construction sector holds a lot of potential and promise for the year ahead and we are looking forward to being a part of it.


Stuart McKill

Stuart McKill, sustainable habitat leader for Saint-Gobain in Scotland

Like many others, our predominant hope for 2018 is stability and growth within the markets in which we operate. We believe this can be delivered through the following:

  • A commitment to focus on the wellbeing of occupants and not just capacity and building quality. Our sector has the potential to make a vast positive societal impact by adopting a holistic approach to building design and construction whereby energy efficiency combined with measures to improve lighting, acoustics, air quality and wider sustainability aspects are considered.
  • The Government taking the lead in setting a higher bar for not only building performance standards but also more ambitious user focussed outcomes. For example, research has proved that better performing buildings in the Education sector result in healthier, more productive and engaged students.
  • A significant push to support the training and development of appropriate industry skills to deliver the above. With materials and building solutions ever evolving it’s also important that we ensure training is relevant and fit for the future of our industry.
  • The industry needs to continue to innovate products and systems to offer the best solutions. For example, one in four Saint-Gobain products that is sold today didn’t exist five years ago.
  • Further recognition of the importance of accelerating programmes to improve Scotland’s existing housing/building stock.

Finally, and most importantly, we hope to see more collaborative working with our business partners to deliver better buildings, solutions and a legacy around infrastructure and construction that will serve future generations.


Mark McKay

 Mark McKay, national account manager at Plastic Surgeon

The continued expansion of university cities looks set to continue in 2018. This growth is partly funded by Chinese investment in UK cities and infrastructure, but also the attraction of students from south of the border to Scottish universities. As student numbers rise, new educational buildings and student accommodation will be required to service the growth.

As the UK’s largest specialist repair service we also want to see the on-going growth of sustainable construction across the board. By increasing the number of damaged items that are repaired rather than replaced on-site we will see a significant reduction in the environmental impact of new construction projects.

Plastic Surgeon is set for record landfill savings as a result of our repairs and this is set to further increase in 2018 and beyond.


Paul Kelly

Paul Kelly, managing director, AS Homes (Scotland) Ltd

As a housebuilder that’s currently building affordable housing developments for social housing providers, we are certainly busy at the moment, and are optimistic that this will continue into 2018.  While I welcome the Scottish Government’s long term commitment to affordable housing, I do feel that the target of providing 50,000 new homes, including 35,000 for social rental, over the term of the parliament will be very challenging to achieve. This is due in no small part to the fact that efforts to speed up the planning process and free up more land for house building have not been particularly successful so far. To address this problem I’d like to see a presumption for planning departments to approve plans for affordable homes on non-contentious, zoned sites.

I also think that the seemingly ever-present issue of skill shortages in the construction industry is likely to become even more of a problem in 2018, due to increased demand for suitably qualified tradespeople and site management personnel.

This is something I’d like to see the Scottish Government and the industry itself do more to address. In 2018 we could also potentially see a slowdown in private house building due to the effects of Brexit, but I don’t see any real sign of this yet.


Newell McGuiness

Newell McGuiness, managing director, Select

The recent announcements by the Scottish Government of a review of building standards, made urgent by the Edinburgh schools’ construction issues and the Grenfell Tower disaster, will loom large in 2018 and should have positive consequences for the sector.

It is the ideal opportunity to make it a mandatory requirement to use the existing approved certifier schemes, particularly for Government-funded work, and to extend the process to all Schedule 3 work [work subject to building regulations but not requiring a warrant].

In addition, the announcement in November to the Scottish Parliament by the Cabinet Secretary for Communities, Social Security and Equalities, Angela Constance, that she wanted to understand what part Certification could play in driving up standards could be significant. Our view is that the Scottish Government should be proactive on the issue, take a lead and score an easy win by making the current Certification schemes mandatory, rather than optional as they are at present. There are a number of issues surrounding approved certification which we think the review could profitably address in order to remove anomalies and build confidence in the certification process.

The Scottish Government should go even further by demonstrating genuine leadership and joined-up thinking in taking the opportunity to introduce legislation to regulate the profession of electrician. At present anyone can call themselves an electrician, putting public safety in constant jeopardy from unsafe working practices and sub-standard electrical work. It is astonishing that regulation of the profession of electrician is standard throughout the EU and many other countries, but not in the UK.


Dr Graham Paterson

Dr Graham Paterson, executive director, City Building

A key aspiration for City Building in 2018 will be to continue to improve diversity throughout the business.

Diversity is extremely important to City Building and the wider construction industry as it encourages different opinions and ways of doing things, which is crucial to improving productivity. It is also important to succession planning and ensuring we have a strong talent pool capable of leading the business in the future. An ageing workforce has been identified as a serious concern for the construction industry.

Historically, craft trades have been male-dominated but we’ve made great strides in attracting women into the industry and now employ 20% of all female craft apprentices in Scotland. We’re also seeing some of our female apprentices climb up the career ladder and enter management. Indeed, we are now in a position where 55% of our senior management are women.

Over the last few years we’ve had a strong focus on BME recruitment and retention, but we know we’ve got more work to do here so in 2018 we will be exploring how to communicate better with under-represented groups. Measures could include holding more information sessions in community outlets and increased engagement with parents so that families understand the opportunities available and can support young candidates through the apprenticeship recruitment process.

For us, embracing a culture of inclusiveness isn’t about ticking boxes; it is about creating a better workplace and future-proofing the business to achieve continued success.


Jeanette MacIntyre

Jeanette MacIntyre, managing director, Indeglas

For the past three years members of the Indeglas management team have attended various Meet the Buyer events, engagement programmes and training courses run by hub South West, the public and privately funded organisation which promotes local economic growth and partnership working to improve the infrastructure in south west Scotland. We have found this engagement extremely positive and have received great support from the hub team, leading to new contacts, enquiries and orders for a range of educational and health sector project awards throughout Lanarkshire and Ayrshire.

Based on this experience we have planned similar engagement with the other hub organisations throughout Scotland during 2018 as part of our strategic growth plan which we trust will lead to winning projects on a wider geographical spread, throughout Scotland and beyond.

It will be encouraging if the Scottish Government continues to actively support partnerships like hub South West throughout Scotland, and in taking the lead in encouraging Tier One contractors to engage with local and Scottish registered subcontractors and suppliers, thereby assisting both their growth and that of the local economy.


Graeme Stirling

Graeme Stirling, account executive at Lockton

From an insurance buyer’s perspective, there are a number of factors pointing towards tougher times for the construction sector in 2018, where an anticipated reduction in insurer capacity (the availability of insurance) could have its natural effect on the cost.

Insurers’ appetite for the swapping of pounds and transactional relationships is waning. Increasingly this approach is viewed as no relationship at all, where insurers and their policyholders’ expectations cannot be met.

All too often, an already stretched underwriting resource within insurers’ offices will be presented with marketing presentations with limited information at late notice. This only allows for the ‘pricing’ of the risk, but importantly, not the ‘underwriting’ of the risk, where even a challenging claims experience can often be considered in a positive light, and a proactive approach towards risk management can be evidenced.

When working in conjunction with brokers and insurers alike, from my experience of construction clients, an entirely more positive attitude is adopted by underwriters, where combined input leads to ever increasing safe working practices to everyone’s benefit.

At Lockton we take the view that no one will sell our clients’ businesses better that our clients themselves, where the inclusion of senior management in final negotiations allows for the best of outcomes, as well as an understanding of the process.

The value of a truly tri-party risk managed approach towards the transfer of risk should not be under estimated, and will allow for the continued availability of cover on the best of terms in 2018 and beyond.