Upturn in infrastructure activity provides encouraging signs for Scottish construction sector | Project Scotland

EXPECTATIONS for Scotland’s construction market in the year ahead have improved following an upturn in infrastructure activity, new research has revealed.

The latest Royal Institution of Chartered Surveyors (RICS) Construction Monitor show that overall construction workloads fell flat in Scotland through the third quarter of the year, which is an improvement from the -9% reporting a fall in Q2.

Infrastructure was the only sub-sector to see an uplift, with a net balance of 27% of surveyors noting a rise. The net balances of the rest of the sub-sectors were all reported to have fallen: public housing (-5%), private housing (-5%), private industrials (-6%) and other public works (-8%) with the exception of private commercial which was reported to have fallen flat.

Although workloads overall remain subdued, surveyors are now optimistic on the 12-month horizon. A net balance of 25% of Scottish respondents expect workloads to rise, which is in line with the UK average of 24%.

Despite the positive expectations for workloads, profit margins are expected to remain squeezed. A net balance of -4% of surveyors in Scotland expect profit margins to decrease over the next 12-month period; though this was up from -10% in Q2, and -19% in Q1.

Surveyors in Scotland continue to report shortages in skilled workers. 57% of respondents noted a shortage in quantity surveyors, 48% highlighted a shortage in other construction professionals, and 45% reported a shortage in bricklayers.

David Jack of David Jack Associates Ltd in Aberdeen said, “It’s clear from feedback that the time planning applications take continues to have a detrimental effect on new projects.”

Nana Akyempim of WLC Edinburgh said the shortage of skilled labour is making it difficult to attract competitive tenders.

Derek Lumsden of Balfour Beatty in Glasgow added, “Material prices are still far too high meaning projects are not viable.”

Commenting on the UK picture, RICS senior economist, Tarrant Parsons, said, “These results show some encouraging signs of improvement for the UK construction industry as we move into the final quarter of the year. While growth prospects for the next twelve months appear to be brightening, challenges persist, particularly around tight profit margins across the industry and ongoing skills shortages. Industry professionals anticipate an improvement in credit conditions over the year ahead, which should provide a much-needed boost to industry confidence.”