Iain Gray: This is no way to build Scotland’s economy

WHEN I show visitors round the Scottish Parliament, I point out to them that much of the cement used in its construction came from the Lafarge factory at Dunbar, in my constituency. It has been producing cement for 50 years, and employs more than 150 of my constituents. The recession and consequent downturn in construction activity hit the plant hard, and the workforce have suffered periods of short-time working. They thought help might be, literally, on the horizon, with the construction of a new Forth crossing you will practically be able to see from the factory.

Lafarge blends concrete from cement and waste ash that it sources from ScottishPower at Longannet, just the other side of the new bridge. So both materials are available practically on site. Lafarge has a rail halt, so cement would not even need to be trucked in.

Yet this week it emerged that Hochteif, one of the main contractors for the project, is trialling concrete blends in Germany with Lagerhoff, a company that does not make cement anywhere in the UK. It looks as if the contract will go abroad and the material be shipped in from the continent.

News also broke that steel for the new bridge will be procured in Poland, Spain, and China. This is a far bigger contract and means 24,500 tonnes of steel will be shipped from the other side of the world. The Scottish Government press release claimed steel assembly work would create 100 jobs in Fife. It did not estimate how many jobs in Gdansk, Seville and Shanghai the contract will safeguard. The same press release trumpeted £20 million of subcontracts that have been placed locally. Compare that to the £790m steel contract, or the total value of the Forth crossing contracts – £1.5 billion.

This goes to the heart of the Scottish Government’s economic strategy. Capital investment in public infrastructure is meant to drive economic growth, create private sector jobs and stimulate Scottish entrepreneurism. The new Forth crossing project dominates the capital programme and there will not be another project of this scale along any time soon. We are entitled to ask whose economy it is stimulating.

There are, of course, other capital projects. But the pattern is often the same. Only two weeks ago, the “hub” contract to construct £200m of public buildings in the west of Scotland was awarded to a consortium of English-based companies. This is a project that could, over time, extend to £1bn of investment.

Then there is the biggest capital project in the NHS, Glasgow’s Southern General Hospital. Yet again, the contract was tendered as a whole, valued at £840m and awarded to Brookfield, an Australian company.

It would be wrong to say all capital contracts go outwith Scotland, but these three examples alone amount to more than £2.5bn of the resource that is meant to be supporting our economy and creating jobs in Scotland. Meanwhile, figures released by the Scottish Parliament library yesterday show that, last year, employment in the Scottish construction sector fell by 15.2 per cent. The equivalent figure for England was 1.8 per cent.

Some of the capital programme consists of smaller local projects, funded by local authorities. After all, local authorities can borrow to build, which the Scottish Government cannot. So this investment is also crucial to “Plan MacB”, because it draws down additional resources through borrowing. One example is the new primary school in Dunbar, to which the children of those Lafarge workers will go. But it was not built by a local company either. No East Lothian construction company was allowed on to the shortlist, even though one of them had just completed two superb primary schools for the council on time and on budget. A Stirling-based firm did make it to the shortlist, and the other four companies were from Ireland. The Scottish builder did not get the contract.

The standard defence from both civil servants and council officials is that EU procurement law means contracts must be advertised across Europe. While that is true, such contracts can specify very significant requirements for local employment, training opportunities and other community benefits which should give local companies a significant edge. Small businesses’ share can even be ring-fenced.

In the case of the Forth crossing, contracts could and should have specified a limited carbon footprint, which would have ensured material was sourced as locally as possible, not routinely shipped around the world. That would have helped local companies to compete and to contribute to those carbon-reduction targets the Scottish Government is struggling to meet.

But there is another barrier to many Scottish companies, and this is entirely at the hand of the Scottish Government. The Scottish Futures Trust has been encouraged to aggregate government contracts – coalescing small projects such as schools, health centres, council buildings and leisure facilities into large “hub” contracts so they can tender for hundreds of millions rather than a few million pounds.

Many smaller and medium-sized companies do not have the capacity to bid for this work, and have had to watch as the public construction contracts which are their bread and butter disappear into multi-million or sometimes billion-pound contracts.

Remember Alex Salmond’s boast that he would issue “patriotic bonds” to build “patriotic bridges and patriotic schools”? Instead, he is issuing tenders no Scottish company can win. That is not patriotic. It is selling Scotland short.

• Iain Gray is the Labour MSP for East Lothian.