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Scottish Futures stalemate is exacerbating downturn

Smaller civil engineering contractors in Scotland are being hit by above-average inflation and delays in public project contract awards, according to the Institution of Civil Engineers. By Simon Ellery

Derek Elder, director of the Institution of Civil Engineers in Scotland said that civils work overall was holding up strongly due to massive ongoing water contracts.

But he warned concern was growing for smaller contractors struggling with 10 per cent construction cost inflation – brought about by higher fuel costs and a surge in salaries – and the Government’s failure to quickly replace PFI with the Scottish Futures Trust as a means of delivering major public projects.

Last week finance secretary John Swinney named Sir Angus Grossart as chair of the newly established Scottish Futures Trust company, which has been formed to deliver £35 billion of public projects such as the £1 billion new Forth road bridge over the next decade.

Ministers expect the new model – which aims to curb the “excessive” profits made by private companies – will lever in £150 million a year from the private sector.

But contractors claim that, because of the delay in its launch, no new public contracts have been awarded since January and workload in the civil engineering market has slumped.

Firms are reported to already be making job cuts. Civil Engineering Contractors Association in Scotland chief executive Alan Watt said: “The general impression is that companies are battening down the hatches – although no one has gone into receivership.”

Mr Elder said that overall, the Scottish construction industry had not felt the worst of the downturn, although the housing and commercial markets had been hit.

He flagged up ongoing work with Scottish Water – which represents the largest civils work in the country – transport work, with the M74 ongoing and the Aberdeen bypass and groundworks for the 2014 Commonwealth Games.

Mr Watt added that contractors in housing, industrial and retail were realigning their firms to target areas such as transport, utilities and retail.

Meanwhile Grahame Barn, director of the Federation of Master Builders Scotland, said its members were largely unaffected by the credit crunch because they thrive on repairs and maintenance work in the private sector.

He said: “Members are saying they still have work through till 2009.”

Analysis: It’s time to put Scottish Futures plan into action

By Michael Levack

The SNP Government has considerable political capital staked on the promise that they can deliver public sector projects cheaper.

They have proposed a nonprofit distributing model (NPD) badged as the Scottish Futures Trust. Despite there appearing to be little difference between this and the established NPDs already in use across the UK, no new PPP projects have been commissioned since the SNP came to power.

Last week’s muchanticipated announcement of the next steps amounted to little more than the appointment of the respected financier Sir Angus Grossart as the chair of the new Futures Trust.

For the construction industry the lack of progress was a major disappointment. While I am sure Sir Angus and his team can improve standards in the public sector, the lack of any new money or a clear pipeline of work could exacerbate fears over the downturn in house building.

There are now real fears for the future direction of our industry in Scotland. The £14 billion infrastructure investment programme with marquee projects such as the new Forth crossing should provide stability. However, the absence of any detailed plans on financing these projects offer little prospect of a brick being laid soon.

Homes for Scotland estimate that over 15,000 jobs have been lost during the past three months and Scotland’s skills base, crucial to delivering future projects, is being steadily eroded.

It is hard to believe that any other industry experiencing similar difficulties would not have been the focus of ministerial action by now.

Michael Levack is chief executive, Scottish Building Confederation