Scottish construction SMEs defy post-Brexit vote dip

Kier construction stockSmall to medium-sized firms (SMEs) in the Scottish construction sector have reported growth in the three months following the UK’s decision to leave the EU, albeit at a slower rate than in the preceding three month period, a new survey has revealed.

According to the State of Trade Survey for Q3 2016, published today by the Federation of Master Builders (FMB) Scotland, the growth was boosted by consumer demand for building work which remained resilient in the three months following the vote for Brexit.

The survey, the first post-referendum poll of construction SMEs in Scotland, added that businesses are forecasting rising activity levels over the next three months, though at a much slower rate compared with the quarter.

On the negative side, output prices, material costs, wages and salaries are all projected to increase over the next six months.

A regional perspective, indicating the net difference between firms saying higher and those saying lower for workload, expected workload and enquiries questions, revealed Scotland’s net balance dropped 13 per cent to +8.

Weighted by the firm’s size, around 21 per cent of the responses were positive, down from 33 per cent. In contrast, the share of weighted responses which were negative edged up to 13 per cent from 12 per cent. Two thirds of weighted responses were neutral, up from 55 per cent.

Commenting on the results, Gordon Nelson, director of FMB Scotland, said: “Despite some of the ominous warnings on what the referendum vote might mean for consumer confidence in Scotland, demand for domestic building work and new build homes has so far defied any significant dip. Workloads for construction SMEs have remained resilient and enquiries from consumers are holding up. Looking ahead, most firms are either predicting steady or growing workloads for the coming months, demonstrating an underlying resilience to the Scottish construction sector.”

Nelson added: “However, given the uncharted waters we’re about to enter, few construction bosses will be complacent. Most will remember the challenges that arose as a result of the uncertainty created by the last Scottish independence referendum. When you combine the possibility of a second independence referendum, and the prospect of further disruption being caused by the triggering of Article 50 in March, then the Westminster and Holyrood Governments must do all that they can to steady the nerves of industry and provide some certainty.

“The Scottish Government in particular must look at innovative schemes such as the new Home Building Fund being introduced in England as a means by which to stimulate activity in the house building sector by helping to improve access to finance for small firms.

“Our survey also highlights the severity of the skills gap this country faces, almost two-thirds of firms are struggling to hire bricklayers and 55 per cent are experiencing difficulties hiring carpenters and joiners. If the UK leaves the European Single Market, this shortfall may well be compounded by the possibility of an end to the freedom of movement of people, which will only make the situation worse.

“With less than six months until the UK-wide Apprenticeship Levy is introduced in April next year, we’re still awaiting confirmation from the Scottish Government that it will use the funds raised by the levy for apprenticeships. If this indeed is the intention, then the Government is leaving itself precious little time to collaborate with industry on ensuring that any new funding system is intuitive and accessible for SMEs, which train the vast majority of construction apprentices.”

Share icon
Share this article: