Construction sector ‘broadly positive’ despite public sector decline

Scottish Chambers of CommerceThe Scottish Chambers of Commerce has called on governments north and south of the border to provide more investment to assist Scottish construction firms through the public sector procurement process.

A survey from Scottish Chambers of Commerce last week showed growth in sales revenue in the construction sector accelerated between the second and third quarters, though business reported another decrease in public sector work.

Liz Cameron OBE, director and chief executive of Scottish Chambers of Commerce, said the figures should prompt the UK and Scottish governments “to consider renewing their focus on developing Scotland’s infrastructure and supporting investment in Scottish businesses through the public sector procurement process”.

A net percentage balance of +20 for total contracts was largely attributed to a rise in private sector commercial contracts, which increased for 40 per cent of all firms. Conversely, results from public sector contracts remained in negative territory with a net percentage balance of -5.1.

There was a positive net balance percentage balance of +32 recorded for expenditure on investment, with growth recorded for both training and capital investment with net percentage balances of +34 and +23 respectively. Investment expenditure is expected to continue to grow in Q4, shown by a net percentage balance of +16.

Fewer than 9 per cent of firms reduced employment over the quarter and the net percentage balance of +33 reported is higher than at any other time since Q2 2007. Employment levels are expected to be maintained in Q4 with 57 per cent of businesses expecting no change and 35 per cent anticipating an increase.

Liz Cameron
Liz Cameron

The number of firms actively recruiting staff over the quarter was at 63 per cent. From this 48.4 per cent are experiencing recruitment difficulties. Difficulty in recruiting staff also appears to be driving up wage costs.

Scottish Chambers of Commerce’s Quarterly Economic Indicator engages with five of Scotland’s key business sectors: Construction, Financial and Business Services, Manufacturing, Retail & Wholesale and Tourism.

These findings, released in collaboration with the University of Strathclyde’s Fraser of Allander Institute show the position of businesses for the third quarter of 2015.

Overall the report signalled an amber warning light for the Scottish economy.

Liz Cameron said: “The results of this survey should trigger an amber warning light for our Governments north and south of the border. Despite another extremely positive summer for our tourism sector, there is a trend of slower growth among other parts of our economy. In addition, the apparent slowing down of investment growth in many businesses signals a direction of travel which could lead to declining levels of economic growth.

“There is further evidence of the continuing effects of low oil prices on the Scottish economy, with the performance of oil and gas service businesses again dampening results in the service sector. The picture in manufacturing is also mixed, with sales up only marginally and profitability declining.

“The construction sector remains broadly positive, though once again businesses have reported a decline in public sector contracts. This should prompt our governments to consider renewing their focus on developing Scotland’s infrastructure and supporting investment in Scottish businesses through the public sector procurement process.

“Tourism businesses reported very strong performance again in 2015, building even further on the solid platform of 2014. Events such as the Commonwealth Games and Ryder Cup seem to have succeeded as a ‘shop window’ for Scotland and with new developments such as Glasgow’s SSE Hydro – now the second busiest entertainment venue in the world – Scotland’s tourism offering is better than ever.

“Although Scotland’s economy is now performing above the level we were at before the recession, we cannot and must not take future growth for granted. It is not inevitable. Growth will require a strong focus from the Scottish and UK governments on making Scotland a better and more attractive place to do business, reducing fixed costs such as Business Rates and intensifying investment in digital and transport infrastructure.”

Related posts