Comment: Build on optimism in construction
Scotland’s property and construction industry, which was one of the sectors hardest hit by the downturn, is showing increasing signs of confidence and growth. The improving mood of the sector reflects the growing evidence that there is light at the end of the tunnel.
The global downturn had a significant impact on the construction industry, arguably more so than any other. The industry employs more than 170,000 people across 31,000 businesses. In cash values it is bringing more than £6 billion to our national economy, so its success is vital.
Increasing demand from homeowners buoyed by government assistance, and rising confidence in the wider economy is providing a shot in the arm to the industry with long-term growth finally a prospect for many construction businesses.
More than £769 million was invested in construction contracts to get Glasgow ready for the Commonwealth Games.
There have also been a number of both public and private sector construction projects unveiled in recent months such as the plans for the 4,000-home new town at Shawfair, south of Edinburgh, led by developers Buccleuch Property and Mactaggart & Mickel.
Other big projects awarded in Scotland include the new £400m bypass to the west of Aberdeen, a £300m on-shore wind farm based in the Highlands and a new 350-bed hospital at Dumfries and Galloway Royal Infirmary valued at some £200m.
We need to keep up this momentum. Embedded in the growth agenda of the construction sector is a focus on sustainable, energy efficient practices and techniques that the market is increasingly demanding and standards are enforcing.
There are some key incentives and tips that should be considered by firms looking to take advantage of this swell of confidence and investing in growth. There has been a lot of debate about the new Land and Buildings Transaction Tax (Scotland) that is set to replace the UK Stamp Duty Land Tax. However the key point is that it is intended to be more aligned with Scots law and the property market itself north of the Border. As with the tax it is replacing, there will be various reliefs that will affect the construction industry.
It may seem unbelievable but there are some valuable government initiatives aimed at helping businesses to be more efficient and pay less tax. One example is the planned extension of the Business Premises Renovation Allowance to 2017. It allows owners of lease commercial property that has been vacant for more than a year in designated disadvantaged areas to claim tax relief of up to 100 per cent on the investment in the renovation or conversion of that property.
Another tax incentive that has been put in place that is of crucial benefit to the construction sector relates to investing in plant and machinery. Until the end of 2015, a £500,000 annual investment allowance (AIA) provides upfront relief for expenditure on such equipment. Businesses can also benefit from 100 per cent upfront tax deductions on plant as well as other incentives if they are to be used in “Enterprise Zones”.
We are witnessing a revived and more agile construction and property sector emerging from the impact of the financial downturn. It is on the upturn and taking advantage of the opportunities available.
Growth is in evidence and that is good news for the wider economy.
• Lorraine Macphail is head of property and construction Scotland at Grant Thornton UK LLP.
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