SME construction firms build the foundations for recovery

Scotlands SME building sector is 'back on track'. Picture: AP

Its latest survey of small and medium-sized building firms, published today, shows Scotland catching up with the pace south of the Border with its first positive reading since the financial crisis.

Asked about workloads, employment and inquiries, on balance Scottish respondents were positive, with an improvement of seven percentage points taking the score to +4. The proportion of responses which were positive fell from 30 per cent to 26 per cent, but those which were negative declined more, from a third of firms to 22 per cent.

However, the FMB warned that builders are facing cost pressures that will force prices higher, while housebuilding is still not keeping up with demand for homes.

The federation’s Scotland director, Grahame Barn, said: “Scotland’s SME building sector is back on track, posting the most positive results in nearly six years.

“However, there is still more to do. Scotland needs to be building and refurbishing nearly 9,000 more homes a year just to keep up with demand. The cost of supplies keeps rising, and a 20 per cent VAT is still giving cowboy builders the ability to take advantage of householders who are themselves just finding their footing in the recovery.”

Barn called for the government to boost building by relaxing planning regulations on brownfield sites and cutting VAT to 5 per cent on all home improvement work “to give consumers the confidence they need to undertake new home improvements”.

Across the UK as a whole, the smaller firms construction sector saw its recovery continue into the final quarter of last year, but at a slower rate than earlier in 2013. Workloads grew at a lesser pace than during the previous quarter, while employment levels declined.

Official figures showed the wider construction sector weakened significantly in November, and is likely to act as a drag on growth when the first estimate of UK GDP is published tomorrow. Nevertheless, the recovery is likely to remain on track with overall output increasing by about 0.7 per cent quarter-on-quarter across the UK economy.

The FMB survey also found the private housing sector saw a significant fall-back towards the end of last year, while social housing activity gathered pace.

It comes as an opinion poll for the Scottish Building Federation (SBF) found the public favours infrastructure spending as a way of boosting the economy.

Investment in infrastructure emerged as the general public’s top priority, beating categories including improved childcare, free access to higher education and reducing Scotland’s energy imports.

The poll follows the recent publication of the Scottish Government’s draft budget bill for 2014-15, which earmarks more than £4 billion in infrastructure investment over the next financial year. SBF said the poll vindicates a continuing focus by ministers on prioritising investment in capital projects to upgrade infrastructure, including areas such as transport, housing, broadband and the electricity grid.