Warning signs for construction as growth slows among Scottish builders

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Scottish building firms have experienced a slowdown in growth for the second consecutive quarter amid skills shortages and inflationary pressures, according to the Federation of Master Builder (FMB) Scotland.

Key results from the FMB’s latest State of Trade Survey revealed that the performance of Scotland’s smaller building firms in terms of workloads, expected workloads and enquiries dropped by six percentage points in Q3 2017 compared with the previous quarter.

According to the survey, which is the only quarterly assessment of the UK-wide SME construction sector, inflationary pressures remain intense amid sterling’s post-Brexit vote woes.

The number of construction SMEs predicting rising workloads in the coming three months fell to 41% from 48% in the previous quarter, while 82% of builders believe that material prices will rise in the next six months.

Highlighting skills shortages throughout the sector, the survey revealed that 61% of construction SMEs are struggling to hire carpenters and joiners and 49% are struggling to hire site managers.

Over half (58%) of construction SMEs expect salaries and wages to increase in the next six months.

Gordon Nelson, director of FMB Scotland, said: “Growth among Scotland’s construction SMEs has slowed for two consecutive quarters. Scottish firms are facing considerable constraints through the growing scarcity of skilled tradespeople. Our latest research shows that 61% of construction SMEs are struggling to hire carpenters and joiners and half of all firms are having difficulties hiring site managers. When you pile on material prices increases, following the EU referendum last summer, there is considerable upwards pressure on small building firms and it’s taking its toll on growth.

“Given these headwinds and the slower growth we are seeing, it is more important than ever that the industry has the structural support it needs. We eagerly await further details of the Scottish Government’s new Scottish National Investment Bank. We would encourage the Scottish Government to ensure that the new bank is set up in such a way that it can effectively support the needs of construction SMEs. These smaller firms find it particularly difficult to access the finance they need and this new finance stream could make all the difference. Anything that gives a leg up to Scotland’s construction SMEs will have a positive knock-on effect in terms of the wider economy.”

Mr Nelson added: “However, it’s not all doom and gloom for the Scottish construction industry – although we’ve seen a slowdown in growth it’s important to remember that the sector is still growing. Also, in recent weeks the Scottish construction sector has flexed its muscles and shown the world what it can deliver with the much-anticipated opening of the Queensferry Crossing. This is a project that Scotland can be proud of and internationally, it helps put the Scottish construction industry on the map.”

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