DECARBONISATION looks certain to dominate much of the attention in the Scottish construction industry again this year, according to some of the sector’s key stakeholders.
To mark the start of 2024, Project Scotland recently asked a variety of figures representing different facets of the industry what their predictions are for the year ahead. From transitioning to lower carbon heating systems to embracing new materials and technologies, sustainability was at the heart of many of the responses.
The ongoing labour challenges and skills shortages also featured prominently, as did the nation’s housing crisis, with the construction industry ready and able to play a key role in helping to address the shortfall.
Gary Holmes, regional MD at GRAHAM Building North, described 2023 as a ‘particularly challenging year’ due to inflationary pressures, adding that the business hopes to see a ‘stabilisation’ of the economy over the next 12 months, which would benefit project delivery, the supply chain, and clients.
“Looking ahead to 2024, we are hoping for a more optimistic year, giving us all a more positive outlook,” he added. “Sustainable practices and outputs will rightfully remain at the top of the agenda and we will continue to see increased use of Passivhaus design standards and a drive towards achieving net zero for both construction and operation of buildings.
“PBSA and BTR will continue to be important sectors, with demand currently outstripping supply in many of our cities. As our industry continues to evolve with the implementation of innovative software and quality systems, we believe this will lead to a more cost-effective and efficient delivery of the project pipeline.”
John Forster, chair at Forster Group, believes the challenges the construction industry face look ‘even more daunting’, but with that challenge comes greater opportunity to positively impact society and the economic landscape.
“Integration between the renewables and construction sectors is one way we can collectively help future-proof the industry, ramp up housing delivery and meet net zero targets,” he stated. “In 2024 I want to see how these net zero solutions are supporting and impacting local communities and SMEs, specifically the real jobs generated by new and thriving construction SMEs who will be the driving force of net zero in every community.
“More than ever our rapidly shrinking construction workforce needs to diversify, bringing positive opportunities and solutions. We have already been having conversations and are working with a range of partners to build confidence and understanding on how we can innovate and collaborate to transform the industry.”
Morag Angus, head of property and construction and chief surveyor at Scottish Government and co-chair of the CLF’s transformation board, and Peter Reekie, chief executive of the Scottish Futures Trust and co-chair of the CLF’s transformation board, issued a joint statement saying the need for change across our industry has never been greater and they expect that to continue in 2024.
“The start of this year will see the Transformation Action Plan published for the construction sector – a firm commitment made by the Construction Leadership Forum (CLF),” they said. “The Transformation Action Plan will establish the essential links needed to deliver change across the sector.
“The sector’s move to embrace Passivhaus has already demonstrated how dialogue across the design and delivery processes has brought about improvements in quality, net zero buildings. This year that transition will continue by setting a clear agenda addressing net zero; by embedding a shared quality culture; by establishing competency as the new currency, and by widening the benefits of an already strong supply chain.
“Delivering real improvements for our industry is the purpose of the Transformation Action Plan. We’ve made progress already and have lots more to do.”
Gordon Nelson, Scotland director at the Federation of Master Builders, says his hope, rather than prediction, is that there will be ‘robust workloads’ for master builders and the wider industry.
“By and large, 2023 has been a good year for local building firms: long may this continue,” he said. “Collectively our industry can’t lower inflation nor raise consumer confidence; but it can prevent unscrupulous payment practices which imperil SMEs and in turn jeopardise the livelihood of their employees and their families. I expect greater collaboration across industry to tackle this, as our members indicate that it is becoming a growing menace.
“We also urgently need both ambition and clarity from our policy makers to drive investment in and demand for domestic fabric improvements and energy retrofit works to de-carbonise our homes. Local SME construction firms will then have the confidence to commit time and resources to refocus their business and upskill their workforce to meet this demand.”
Martin Smith, chief executive of Muir Group, said that having celebrated the firm’s 50th anniversary in 2023, Muir is looking ahead to the next 12 months with renewed energy and the focus will be on diversification and innovation.
“We’re delighted to have recently supported the delivery of the new multi-million pound Rural and Veterinary Innovation Centre for Scotland’s Rural College (SRUC) at their Inverness Campus,” he explained. “Championing environmental sustainability, this innovation hub will help forge new links between science and industry.
“With mortgage rates dropping, we are also starting to see more new build housing enquiries and reservations. Interestingly, we are building more new bungalows which can be an attractive option for first-time buyers and young families. In addition, we’re actively pursuing more work within the social housing sector.
“While the challenges faced in 2023 are unlikely to disappear overnight, we are confident of a cautious recovery over the next year.”
Gillian Ogilvie, MD of Will Rudd Edinburgh, said making the industry more sustainable and ensuring the built environment becomes more energy efficient will continue to be a real priority over the next year.
“Retrofitting to future-proof existing buildings is an area we are becoming particularly well known for and we are confident this workstream will grow in the year ahead,” she added. “Retrofitting requires a collaborative approach, with multiple partners, and we anticipate seeing more companies within the sector diversifying to drive this important work and help tackle the housing crisis.
“We’re pleased to have celebrated important milestones over the last few months, for example handing over the state-of-the-art Edinburgh Futures Institute, and we look forward to a robust pipeline of work in the year ahead. While the challenges faced over the last year are still present, there is cause for cautious optimism for a recovery in 2024.”
Kirsty Connell-Skinner, programme manager at HCI Skills Gateway and sustainable construction partnerships manager at Edinburgh Napier University, said 2024 needs to be the year in which Scotland gets serious about equipping the workforce with the skills for net zero.
“We need a transformative shift, powered by major programmes like the two Green Freeports and the City Region Deals, to build real collaboration between schools, colleges, universities and employers to ensure training reflects real-world scenarios and emerging trends,” she explained. “Every review into skills in Scotland tells us we need a flexible and accessible approach to build a more inclusive, diverse, and successful construction workforce, equipped for low carbon construction challenges.
“We need to be ready across classrooms and construction sites to embrace change. Traditional construction methods have to integrate with cutting-edge technologies, such as virtual reality and digital tools, with an emphasis on sustainable building practices, renewable energy solutions, retrofit, and low-carbon technologies. That requires joined-up thinking – and more importantly strategic funding, especially to boost modern apprenticeships and college skills provision – to give us the chance to achieve a net zero built environment.”
George Buchanan, director of George Buchanan Architects, is anticipating an increase this year in the use of ground and air source heat pumps as a replacement for traditional gas boilers.
“These generally perform best when used in high-performance buildings that retain heat and are airtight, so we will also see much more of a focus on upgrading the fabric of older and listed properties to address heat loss,” he said. “It will be crucial that we continue to develop diverse and innovative construction techniques which can preserve the structural and aesthetic integrity of our period properties, while making them fit for the future.
“The trend of hybrid working will only strengthen, demanding greater performance from our homes. With interest rates not expected to decrease until spring 2024 at the earliest, and the persistent high cost of living, borrowing for home improvements remains restricted. The option to ‘build-big’ will not be available to many.”
Steven Simpson, MD of The Cruden Group, provided his thoughts on the housebuilding sector following a period of ‘turbulence’ for the industry. “Delivery of affordable housing has been significantly impacted by soaring inflation, cost of new regulations and funding constraints,” he stated. “Meanwhile, demand for new homes has softened due to sentiment and borrowing costs.
“Private housing remains core to Cruden’s growth plans in 2024, however we remain committed to delivering affordable housing through land-led opportunities in collaboration with partner organisations. Our re-planned organisational structure has brought our house building and contracting divisions together, creating a strong pipeline of both private and affordable housing projects throughout central Scotland. This strategic approach has enabled us to leverage our talent pool, allowing our workforce to collaborate and share expertise.
“Challenges are inevitable, particularly against a backdrop of regulatory and political change, however they present opportunities for reflection, growth and innovation. I am confident the agility of our business will help us navigate whatever lies ahead in 2024.”
Alan Wilson, MD of trade body SELECT, is predicting a bright future in 2024 for Scotland’s electrical industry.
“It’s clear that we are all increasingly dependent on electricity; for our light and heat, and now for our transport as well as interconnected activities such as data management and interconnectivity in our homes and offices to allow us to work and enjoy our leisure time. In 2024, it’s clear that this dependency will grow, as more of us install environmental technologies in our homes with more demands placed on properly qualified electricians to design, install and maintain such products.
“In the electrical sector we have been lucky to see a growing number of apprentices being recruited, over 900 in 2023/24 and we see this trend continuing.”
Rod Allan, MD of Donaldson Timber Systems, expects activity to be lower throughout 2024, with the construction industry set to ‘batten down the hatches’. “We do however need to use 2024 to focus on the future and get ready for the range of changes coming to housebuilding, with the Scottish Passivhaus equivalent standard being developed, requirements for better environmental performance, and a reducing labour pool,” he added.
“There is already a strong heritage in Scotland using timber frame, but these new requirements will bring a step-change in new materials and technologies to be incorporated into the houses we build, and new skills to be trained. An increase in pre-manufactured value is the only way we will successfully respond to these challenges, and the construction industry should focus efforts throughout 2024 on developing these systems, and completing the relevant testing and certification to ensure the products are durable and suitably industrialised.”
Jon Dunwell, CEO of Morris & Spottiswood, believes we will continue to see challenging recruitment and skills gap shortages across the industry. “In the immediate future this means recruitment of new staff can take longer and in the short to medium term this shortage of skilled staff will have an impact on construction costs that the industry will need to absorb,” he explained. “At Morris & Spottiswood we are committed to working with our supply chain and key partners to encourage people into the industry. We provide a broad range of career pathways from apprenticeships and graduate placements to a broad range of internal training and developments which supports our aim to promote from within.
“To meet future needs, there needs to be an industry-wide focus on embracing modern methods of construction and ensuring a better partnering between governments and industry, working more closely to support training and skills development.”
Liz Hamilton, senior land and planning manager at AS Homes (Scotland), expects to see more local authorities declaring housing emergencies.
“Whilst drastic, this move should bring more stakeholders to the table to positively support the delivery of all tenure homes,” she added. “Planning applications are taking too long to determine, making it difficult for SME housebuilders to maintain and grow annual completions. Meanwhile the costs of submitting a planning application continue to rise, disproportionately impacting smaller sites.
“The availability of deliverable land will continue to pose a challenge to new home building, given the apparent vacuum of no further housing allocations until new style local development plans start to surface around 2028. Homebuilders have the capacity to deliver more, but we need supportive policies to do this. Given the recent drop in completions and new build starts, this is something that central and local government should be bringing into sharp focus, alongside seeking a greater understanding of Scotland’s housing needs and aspirations.”
Alastair Wallace, senior partner at Thomas & Adamson, warned the UK construction industry is facing the most critical challenge in our lifetime – and it could not have come at a worse moment.
“As major firms work to survey the impact of the RAAC crisis, the sector is in the middle of an unprecedented skills and labour shortage, which could impede the effort to investigate the extent of the threat,” he said. “There is pressure to get this issue right as it’s at the front of the public’s consciousness. However, there are only a limited number of structural engineers and building surveyors qualified to roll that out. At Thomas & Adamson, we have that experience, but many don’t.
“Decarbonisation will continue to be a major pipeline, with £300 billion needed to meet net zero targets in social housing stock in the short to medium term. Many projects are moving away from traditional gas heating to electric sources, and it’s increasingly about whole-life carbon. As ever, we remain optimistic for what lies ahead in our industry.”
Gail Matheson, CEO at HHA, said the housing crisis in Scotland has been exacerbated by the continued dip in housebuilding and construction outputs and sadly, she believes this will continue to decline throughout 2024.
“Stemming from the Covid-19 pandemic, material and repair costs have continued to rise with inflation which has made it ever more challenging for private developers to meet ambitious housebuilding targets and we are unlikely to see real change here in the coming months.
“There is however a great opportunity in realising the potential that existing vacant buildings hold in becoming fit-for-purpose housing. In 2023, HHA was part of transformative efforts to revitalise a former department store on Union Street in Inverness to offer mid-market rent and social housing.
“With regeneration, however, comes significant funding pressures. If we are serious about repurposing and retrofitting, then I’d like to see priority funding for developers who want to make positive change to Scotland’s housing sector and more land made available for development purposes.”
Euan McDermott, pre-construction manager at Fleming, said it feels like some of the challenges facing the industry are ‘stabilising’, which opens the sector up to some exciting changes – mainly around sustainability.
“With net zero targets for the industry approaching as early as 2025, we see a lot of businesses seeking to upskill staff and review practices to meet these targets – considering their systems, reviewing approaches and utilising materials with lower embodied carbon, such as timber as a structural solution. Over the last few years at Fleming, we’ve been investing in our people to ensure we can support our clients as low-carbon and high-performance buildings become the norm.
“We’re embracing Passivhaus and other high-performance methodologies on more projects than ever, we’re helping to upskill our existing supply chain and our apprentices are benefitting from delivering works on net zero sustainable projects. When net zero deadlines come, we’re ready!”
Fergus Adams, MD at Dougall Baillie Associates, said the Scottish construction sector faces a critical challenge: tackling the housing deficit, especially in social housing.
“Highlighted at the Homes for Scotland Conference in November 2023, the discussion underscored a staggering shortfall of 118,000 homes accumulated over the past decade, due to persistently missed targets,” he said. “Housebuilders grapple with the arduous task of delivering sites amidst challenging market conditions, stringent changing regulations, and understaffed planning departments. Addressing this challenge demands a multifaceted approach, requiring innovative solutions to streamline construction processes, navigate regulatory hurdles, and make real progress to meet housing demands.
“The urgency to bridge this gap necessitates collaboration between clients, design teams regulatory stakeholders and the public. Only through working together in a collaborative way can we start to make inroads into the housing scarcity and ensure sustainable, equitable housing provision for Scotland.”
Michael Ross, chief executive of hub South West Scotland, said its participant base is under pressure in terms of reduced budgets, reduced resources and creating and implementing sustainability plans.
“With this backdrop we have already seen a slowdown in public sector projects coming to market,” he lamented. “Overlapping with this – and from the analysis of handing over £150m+ of projects in 2023, we have identified issues in relation to a growing skills gap and a shift in behaviour from the supply chain with many operatives commonly working a four-day week.
“Optimistically, we smashed through £1 billion of financial close value in 2023 and continue to drive solutions to invest in our long-term participant owned partnership model focused on high quality, value for money sustainable projects that generate local jobs, apprenticeships, and recirculates spend locally. Never has this model been more crucial for the delivery of public sector projects.”
Will Payne, general manager at Akela Ground Engineering, said the economic challenges facing the construction sector are likely to continue in 2024.
“Overcoming these well-documented challenges should be a collective focus for the industry so that we can future-proof the sector and I believe innovation will play a crucial role in helping the construction industry recover,” he added. “Developing and maintaining relationships with clients will also be of critical importance as we navigate the highs and lows of the next year. At Akela we’re building a lot of new relationships as we expand into England and beyond the central belt of Scotland.
“Ground engineering plays a crucial role in making the most efficient use of land. At Akela we are currently working on exciting new solutions for ground engineering which will help customers reduce costs and lead times, driving productivity. We’re planning on bringing this to the market in early 2024.”
Julie Moulsdale, MD of Perceptive Communicators, said that for the ‘naturally modest’ construction sector, communicating to build a strong reputation helps in so many ways, from attracting and retaining employees, to securing funding, planning permission and attracting new customers.
“It’s not an easy time, but over the last 17 years, we’ve noticed that fortune favours the brave in this sector. Those continuing to build their reputation leapfrog those who batten down the hatches. Political winds of change will also offer new engagement opportunities with politicians and stakeholders.
“In this climate clients are focused on ensuring any investment pays dividends. Social media is measurable and, implemented correctly, very effective in driving sales. We were delighted to secure a prestigious award last year for Cruden recognising a very effective social media sales campaign. Sustainability remains key and ESG will escalate even higher on the agenda, with more clients seeking assistance in how to deliver and communicate ESG measures effectively.”
Martin Joyce, executive director for regeneration at Clyde Gateway, expects 2024 to bring about further changes in our transition to lower carbon heating. “The last few years have seen concentrated minds due to higher energy prices, but I think this year will be when we see more action around district heating. More businesses and organisations are focusing on ESG principles and households are having to count the cost of higher bills. But we are at the tipping point. With gas boilers being phased out for new properties in April, and the benefits of district heating for retrofitting becoming a reality, action needs to accelerate.
“In Clyde Gateway, our innovative heating and cooling district heating system will use heat from waste water and connect to more commercial properties, powered by a solar farm in Shawfield. Even more homes will connect to our district heating system in Dalmarnock too, which is already reducing carbon and lowering bills for households.”
Moray Stewart, land director at Cala Homes (West), said the housebuilder is entering the new year with optimism given steady home sales throughout 2023 as buyers prioritise high-quality construction and design, and will continue to invest in well-connected developments around Glasgow and the west.
“2024 will also be a hugely important year for the future of planning in Scotland as we see how the National Planning Framework 4 is incorporated more widely and how local authorities interpret new policies,” Moray added.
Malcolm Morrison, director of GMG Energy, said it’s tough to be optimistic when there are so many challenges over and above the ‘usual headaches’ like finding skilled labour and accepting ‘extraordinarily’ long lead-time on material supplies.
“On top of this, the apparent lack of serious strategic thinking at local, Scottish and UK political level doesn’t make life any easier,” he stated. “Equally, many planning decisions can be hard to understand.
“In my view we have to stay confident and continue to work hard. If we do, I believe the collective impact of Brexit and Covid will quickly fade. Unfortunately, there seems to be a shift, maybe generational, from the notion that working hard is a good thing in and of itself. Our business has benefited from the new capital allowances rules, so we’ve invested heavily in technology to improve efficiencies and processes. With mortgage rates finally dropping there is hope for some return to normality and less turbulence ahead.”
Riccardo Giovanacci, MD of Rosevale Letting, is hopeful that in 2024 the Scottish Government will address the housing crisis in Glasgow and Edinburgh. “The lack of housing stock available either to homeowners or buy-to-let investors, is causing prices to be higher than they should be. Couple that with rising interest rates, and you have a tough year ahead. It would be great to see the Government listen, for once, to those who have ‘boots on the ground’.
“The housing crisis affects everyone, not just those looking to buy or rent. Not only do we need to build more homes, we need also to look at vacant commercial property that could be converted, thereby offering a faster turnaround while still offering attractive central locations.”
Ramsay McDonald, MD of Deanestor Scotland, said materials prices have stabilised, but the cost of products derived from timber, oil and steel and that are highly energy-dependent will continue to rise.
“The situation in Ukraine is the major factor in this price instability. There is still a very significant shortage of skilled labour in the construction sector in Scotland and a reducing number of apprentices.
“The education sector remains a strong source of work in Scottish construction and that is likely to continue for at least the next two years following the recent announcement on the LEIP phase 3 funding. Healthcare will continue to be weaker and is dominated by a very small number of large hospital projects. Student accommodation will be an important source of work for construction in Scotland over the next 2-3 years but by contrast, investment in build-to-rent (BTR) and new project starts have slowed significantly. This is due to the Scottish Government’s policy on rent caps and eviction protections and so is unlikely to change in 2024 and beyond.
“There is a clear trend towards offsite in the BTR and student housing sectors in Scotland. Bathroom pods, for example, now feature at front-end design stage and more developers and contractors are keen to explore offsite to help address skills shortages and achieve better quality control. MMC is now part of every pre-qualification, and we predict it will be similar to the sustainability agenda and that offsite will be front of mind on every project.”
Claire Rosset, head of architecture (Scotland) at BakerHicks, predicts that companies will accelerate their focus on wellbeing and diversity and inclusion programmes in 2024. “Whether it’s our own staff, future talent or our wonderful clients, valuing people will be the centre of our focus for 2024. Throughout the construction industry, and beyond, we’re seeing wellbeing and diversity and inclusion programmes taking more and more of a central place in organisations. This I have no doubt will continue to accelerate over the coming 12 months.
“We have seen at BakerHicks, through the success of our own D&I Belonging Group and our outreach programmes, that it’s these programmes that will allow ideas and innovation to be encouraged, as people flourish in their working environments. Our Building Harmony choir has been another wonderful project throughout 2023. We will look to continue to grow it, offering construction industry professionals a place to share their love of music, listen to each other, build connections and blow off steam (although the latter could have been debated moments before our debut concert!).
“One of our core values at BakerHicks is ‘talented people are key to our success’ and we very much live and breathe this. By looking after our people success will come naturally. That I believe should be, and is, the direction that the industry is heading, and more steps will undoubtedly be taken in the coming year to enhance wellbeing and encourage everyone to feel at home in this industry, no matter who they are. And this can only be a good thing.”
