Scottish Construction Industry
The construction industry is vitally important to the Scottish economy. It employs over 200,000 people (around 8% of the working population) (Source: ConstructionSkills Labour Market Intelligence Report), with 90% of those employed being skilled professionals, and contributes around £10 billion to the Scottish economy every year - equivalent to around 10% of total economic output (Source: Office for National Statistics Output in the Construction Industry).
The industry also makes a crucial contribution to the wider skills agenda, with one third of all Scottish apprentices in training employed in the construction sector and an additional 15-20% wokring is associated trades.
The economic downturn has had a major impact on the industry with construction output down by 12% in 2009 and the UK industry forecast to contract by a further 3% in 2010.
This has had a major impact on skills and capacity within the industry, with thousands of construction jobs lost and hundreds of construction apprentices laid off.
The SBF continues to campaign for a fair deal for its members. The industry as a whole has welcomed measures by the Scottish Government to boost the industry although feels more can still be done.
The capital investment accelerated into the 2009-10 Scottish budget was strongly welcomed, providing a cushion for many building firms from the worst impacts of the recession. But is has left a major shortfall in capital investment for 2010-11.
In this context, the creation of the Scottish Futures Trust offers a significant opportunity to deliver on the promise of new, innovative and good value ways of delivering private sector investment in the construction of the next wave of schools and hospitals in Scotland.
SBF continues to press the UK Government to cut VAT on maintenance and home improvement work to 5% as a significant means of boosting the sector. We are also campaigning for additional funding to make Scottish homes more energy efficient. This is needed to meet the target of a 42% reduction in Scotland's carbon emissions by 2020, the cost of delivery of which is estimated at £16 billion for Scotland's 2.3 million homes (Source: Scottish Government Energy Efficiency Action Plan).
The recession continues to have a devastating impact on apprentice numbers with 900 construction apprentices laid off and apprentice new starts down by two thirds in 2009 (SBATC Figures). More proactive support is needed to prevent further apprentice redundancies and to create new opportunities for modern building apprenticeships.
Meeting the Industry Challenges
The Scottish construction industry has experienced a fall in output of 12% in 2009, reducing its overall value to the Scottish economy by £1.4 billion (Source: Office for National Statistics Output in the Construction Industry). In 2010, the UK industry is predicted to contract by a further 3% (Source: Construction Products Association Construction Forecasts Winter 2009-10). By 2013 it is expected that the industry will only have recovered as far as the levels of output achieved in 1999.
In September 2009, an SBF membership srvey found that employment within the Scottish construction industry had fallen by 4% in the first 8 months of 2009 - equivalent to the loss of 8,500 jobs.
The industry continues to adapt to the changing environment whilst facing considerable challenges in securing and delivering new developments.
We continue to campaign for a series of measures to bolster the industry through this challenging period.
Public Procurement
Scottish construction's reliance on the public sector for new work has never been stronger. In the current climate, any public money committed towards building, maintaining and refurbishing houses, schools, hospitals and other key infrastructure is very welcome.
However, SBF's Q4 2009 Scottish Construction Monitor revealed that the majority of smaller construction firms are actively avoiding participating in public tenders because the associated costs are prohibitively high.
Less that one in six small building firms (those with an annual turnover below £500,000 and typically employing less than 10 people) participated in a public tender in 2009. Meanwhile, our larger firms reported that, on average, out of every five contracts they went to the trouble of completing pre-qualification for, they were only successful in winning one - and the cost of pre-qualification for the shortlist for each of these tenders could run into thousands of pounds.
We want to see the concerted action by local authorities and the Scottish Government to streamline the public procurement process by allowing those firms that meet specific criteria to qualify automatically for tender shortlists, cutting out the costly and time consuming process of filling in forms and proving credentials each time they bid for a public contract.
VAT
We continue to campaign for the UK Treasury to cut VAT on maintenance and home improvement work to 5% to boost the construction industry. Such a measure would:
- Improve the energy efficiency of Scottish homes
- Support employment and training of hundreds of apprentices
- Drive cash-in-hand builders out of the industry by eliminating their competitive advantage
- Based on experience in other jurisdictions (e.g. the Isle of Man), increase tax revenue for the Treasury
More Capital Investment - Public or Private
The capital investment accelerated into the 2009-10 Scottish budget is strongly welcomed by the industry and has helped cushion many building firms from the worst impacts of the recession. However, it leaves a major black hole in capital investment in the 2010-11 Scottish budget.
With the public finances under significant strain, the Scottish Futures Trust must take advantage of the opportunity and urgent requirement to mobilise significant quantities of private capital to sustain ongoing investment in major capital projects.
With every £1 spent on construction estimated to yield £2.84 in wider benefits to the economy (Source: UK Contractors Group Study: Construction in the UK Economy - www.cbi.org.uk/lekreport), ongoing investment in the industry is imperative to deliver the Scottish Government's objective of sustainable long-term economic growth.
Apprentices
The scale of the impact of the economic downturn on the construction sector has impacted greatly on the retention of third and fourth year apprentices and recruitment of new apprentices.
In the current tough economic environment, more proactive support to prevent apprentice redundancies is particularly important in the construction sector, as is specific recognition of the significant cost to firms associated with retaining third and fourth year apprentices.
And with one in every two apprentices in training employed in the construction sector and associated trades (Source: Skills Development Scotland), there is the need for a targeted strategy specifically focused on creating and retaining apprenticeships in the building industry.
Energy Efficiency
Scotland is now legally committed to cut carbon emissions by 42% before 2020. Scotland's homes account for one third of total emissions. To make Scotland's homes more energy efficient will cost £1.6 billion each year for the next ten years (Source: Scottish Government Energy Efficiency Action Plan).
The Scottish Government cannot possibly hope to meet these targets without a significant increase in funding to impove energy efficiency in Scottish homes and offices.
Additional funding will also help to sustain construction jobs and enhance the green skills our industry needs to make the transition to a low carbon economy.
A Dedicated Construction Minister
The SBF represents an industry that generates around 10% of Scotland's total annual GDP (Source: Office for National Statistics Output in the Construction Industry), employs more than 200,000 people (Source: ConstructionSkills Labour Market Intelligence Report) or 8% of the total working population and combined with the associated trades, employs almost 50% of all Scottish apprentices in training (Source: Skills Development Scotland).
Yet too often, the construction industry's huge contribution to jobs, skills and economic output goes unrecognised.
The creation of a dedicated Minister in the Scottish Cabinet would provide an important focal point for the construction industry, helping to deliver more joined-up policy and ensure that the sector is given full and proper consideration in the preparation of those policies and funding programmes with a direct impact on it.
ENDS)