Euan Clark, president of the Scottish Building Federation, warns that the construction industry in Scotland is facing a daunting combination of challenges
WITHIN the Scottish construction industry, we are growing increasingly concerned about the constrictions facing the sector. Recent discussions with our directors and members have highlighted a dramatic reduction in tender opportunities alongside continued challenges in starting new projects.
Contractors are well aware that significant delays in obtaining appropriate permissions -particularly planning consent and water and drainage technical approvals – are now the norm within the sector and it simply takes too long to get projects onto site.
The average processing time for major housing developments is now over a year, despite a statutory requirement of just 16 weeks. New planning statistics are due to be released next week and we must hope that recent efforts will deliver improvements in performance.
However for many contractors, pre-construction delays also involve long waits for design approval, particularly within local authorities where new working arrangements seem to be detrimental to positive discussions with builders. Insufficient upfront design information is also a substantial problem, transferring risk to the contractor and often causing further delays throughout the project.
These practical problems are compounded by a lack of consistency in the interpretation and application of building regulations across various public sector procurement bodies.
Unfortunately, these challenges accumulate and are now having a material impact on the industry’s prospects.
Unlike the rest of the UK, construction output dropped in Scotland during 2022 and continued to drop into 2023. While UK output increased by 2% in 2023, Scotland’s construction output dropped by -4%, ending the year at £13.6billion.
That is still a huge contribution to the national economy and the total Scottish construction workforce is estimated to be over 200,000. As an industry, we invest in young people – one in four Scottish modern apprentices start in construction – the largest of any sector.
Regrettably, in recent weeks we have seen contractors such as ISG and Hadden Construction enter administration, not only impacting staff and supply chains but also stirring a general unease throughout the sector.
This was recently brought into sharp focus when official statistics revealed that there was a 17% decrease in all sector housebuilding starts and completions between 2023 and 2024 at a time when the Scottish Parliament has declared a national ‘housing emergency’.
While there is still work available at the moment, cuts to funding for social housing and a freeze on capital expenditure in the NHS in Scotland will undoubtedly have an impact.
Next week, it is also anticipated that the Chancellor of the Exchequer will announce tax increases for employers in the budget statement. Meanwhile, the Scottish Government is currently consulting on the introduction of a building safety levy, a new tax on developers which will apply to all new residential buildings.
These problems have been exacerbated by inflationary pressures and higher interest rates in recent years which have pushed up prices in construction and squeezed profit margins.
Put all the above together and it makes for an extremely challenging operating environment for the construction industry. And this is at a time when the sector is the key to tackling Scotland’s national housing emergency, delivering the transition to net zero, securing economic growth and providing skilled jobs and apprenticeships in every community in the country.
The industry needs to come together to address the problems that we are collectively facing and the Scottish Building Federation will engage constructively with both the UK and Scottish Governments, local authorities and others to endeavour to bring about much-needed improvement in the prevailing trading conditions for our members.
