Scotland’s deputy first minister has insisted the government is not taking its eye off the ball with the impending Scottish referendum, as contractors demand clarity on future pipelines of work.
Nicola Sturgeon told Construction News the Scottish Government was “thinking very hard” about what comes after its current revenue-funded infrastructure investment pipeline, which has set out new schemes worth around £2.5bn until 2016.
The referendum on Scottish independence takes place in September this year.
But Ms Sturgeon declined to set a date on when an updated Non Profit Distribution [Scotland’s private finance model] pipeline, published through the Scottish Futures Trust, would be produced.
She insisted investment would continue to flow into Scottish construction regardless of the result of the referendum, but warned Scotland could not afford to “underestimate the challenge of the strength of London” (see box).
One contractor told Construction News his work pipeline was at a 10-year low, and several of Scotland’s biggest contractors said a clear medium-term pipeline was their single largest concern – ahead of the result of the referendum or skills shortages.
Ms Sturgeon was speaking at the launch of the Scottish Contractors Group’s Creating Scotland’s Future campaign, which aims to increase political awareness of the contribution construction makes to the economy.
She said: “We in government are already thinking very hard about what comes after the current NPD pipeline; these discussions and debates are ongoing and will come to fruition notwithstanding the outcome of the referendum.”
Ms Sturgeon said that a ‘yes’ vote would see Scotland secure “a whole range of economic powers we don’t have right now and… that can only be a positive for the construction industry”.
The current Scottish Futures Trust pipeline contains projects including the Aberdeen Western Peripheral Route/Balmedie to Tipperty £745m dual contract and the £203m NHS Dumfries & Galloway acute hospital.
All but one of the projects in the current £2.5bn pipeline are due to be under construction by the end of 2015.
The Scottish Government’s draft budget for 2014/15, making its way through parliament, has earmarked more than £4bn in infrastructure investment over the next financial year.
Scotland’s London challenge
Ms Sturgeon said Scotland could not afford to “underestimate the challenge of the strength of London”.
She said: “It’s not a criticism – London is a fantastic asset – but when you have [business secretary] Vince Cable talking about it sucking life from the rest of the country, we have to be alert to that.
“We’re doing our best within a one-size-fits-all economic policy. If we really want to compete long term with London we need the ability to have a level playing field.
“If there’s a ‘no’ vote – which I don’t like to speculate on – then we will continue to operate within the powers we have got with some additional borrowing powers from 2015 and will continue to do what we can to maximise investment.
“I think we’ll continue to see healthy investor interest, whatever comes after our NPD programme.”
Scottish Contractors Group chair Ken Gillespie insisted the current Scottish Government had “got it” in terms of understanding construction’s importance to the economy from its election in 2011.
The construction chief executive of Galliford Tryand its Scottish arm Morrison Construction said that contractors’ message to the government was “that’s good, but what’s more important is to look forward to the medium term”.
He said: “Whether it’s procurement, pipeline or the disconnection between government and local procurement strategies, they are looking at it, which is why you’re seeing ongoing procurement reform.
“But we really need to see a medium-term pipeline that says, ‘we know what’s coming next’, otherwise we are in a situation where we’re peaking and troughing and we all know that brings inefficiencies – we’re working hard to get that message across.
“Nicola Sturgeon is saying that she’s got that message. What we need to see now is that translate into projects and commitment to medium and long-term pipelines.”
Construction accounted for 14.5 per cent of Scottish businesses in 2013 and the SCG said construction supports almost 50,000 construction SMEs in Scotland.
Balfour Beattymanaging director for Scotland Murray Easton said Scotland was still an important growth region to the contractor. Balfour is bidding on projects valued between £100,000 to £600m, and he said he saw “no reason for that to change”.
“In terms of the pipeline we have seen a great improvement. Our intake of tenders last year doubled, so what we’re looking for is the security of the pipeline in the medium to longer term.”
Shadow business minister and Labour MP Ian Murray said Scotland’s construction industry would be better off if there was less of a “gap between the political rhetoric and action on the ground” and criticised cuts to affordable Housing budgets.
He said the government had to provide an answer on new construction pipelines and that it needed to “plough as much into housing as possible”.
Scottish Futures Trust chief executive Barry White said new projects were starting as a result of the existing pipeline, as development is unlocked by schemes in the existing pipeline.
He said the referendum debate had had little impact on the attractive rates being offered on financing deals by banks and pension funds, but warned that the private sector needed to start applying its PPP skills to new sectors, including the private rented market in Scotland, rather than waiting on guaranteed pipelines.