Scottish construction industry due an upturn

This summer, the quarterly Scottish Construction Monitor reported that a rising confidence evident in three successive surveys had faltered. However, Glenigan’s analysis shows these fears for the future work prospects for Scotland could be misplaced.

In the quarter to August 2017, the value of underlying project starts in Scotland leapt 29% - the biggest rise in any part of the UK – and this will accelerate as the year continues. “Indeed the data reveals construction activity in Scotland is growing faster than anywhere else in the UK,” said Glenigan economics director Allan Wilen.

“Levels of public sector construction spending remain high in Scotland compared to England. We expect activity to accelerate towards the end of this year as greater economic certainty should support growth in the nation in 2017, even if the commercial sector is less buoyant than it was a couple of years ago.”

Major infrastructure projects such as the Aberdeen Western Peripheral Route (AWPR) have been making an outsized contribution to overall output in Scotland.

This summer, Scottish Building Federation president Stephen Kemp commented: “There is a feeling that the underlying fundamentals of the industry are not nearly as strong as record output figures might suggest. “We know that a period of record output from major infrastructure projects such as the AWPR and the Queensferry Crossing is about to come to an end. Strip away those numbers and the performance of other key sectors of the industry such as housing and private commercial don’t look that strong.”

In the first half of 2017, ONS data showed that growth in output in both the public and private residential sectors remain slow and infrastructure work went into reverse. While these figures relate to recent output, which has been subdued, Glenigan data refers to projects starting on site and this suggests output will grow in the coming months. In the 12 months to the end of August 2017, the underlying value of planning approvals in Scotland rose 17%. Mr Wilen explained: “There has been a strong rise in industrial project starts so far this year in Scotland and starts are up in eight out of the 11 sectors monitored by Glenigan.”

After the industrial work and community & amenity work, where the rise came from a very low base, there has been strong growth in private and social housing and civil engineering. Some major infrastructure projects are ending but Transport Scotland’s £3 billion programme to upgrade the A9 between Perth and Inverness will also soon boost output. The project is being built in 11 packages. Work on a £35 million stretch between Kincraig and Dalraddy is drawing to a close but procurement is underway for the next section between Luncarty and the Pass of Birnam and frameworks to support the main works have also been agreed.

With a groundswell of work moving forward, the prospects for Scotland are bonnier than some naysayers expect.