Construction companies in the north of Scotland have forecast a 22% fall in annual turnover by the end of 2009.

The new figures published today by the Scottish Building Federation’s Highland Building Employers’ Association show that the impact of the economic recession on the building industry in the Highlands remains severe.

The Federation's Highland area membership firms across the region found that employment in the Highlands construction industry is forecast to have fallen by 19.4% in 2009.

As part of the survey, discussions with ConstructionSkills also revealed that the recruitment of first year apprentices is down 50% from 400 in 2007 to 200 in 2009 – and many firms are fearful of a future major skills shortage across the region as a result.

The report also identifies a 'massive fall in demand for new private sector houses' throughout the region – down 30% this year – as a major factor contributing to the downturn in turnover, employment and apprentices across the industry.

The report also highlights the Highland industry's strong reliance on public sector work – traditionally viewed as a strength – as a potentially major source of concern as local and national government budgets face a major squeeze.

Three quarters of respondents said they were 'heavily reliant' on the public sector with some suggesting that as much as 75% to 88% of their turnover comes from the public sector.

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The report describes Highland Council's accelerated capital spend of £6million into the 2009/2010 budget as 'helpful', having partially protected construction companies in the region from the worst effects of the recession. But the report goes on to raise major concerns about the knock-on impact on budgets for the forthcoming financial year, with capital expenditure in 2010/11 forecast to fall by as much as 50%.

The report concludes by recommending a series of specific measures to support the construction industry in the Highlands and Islands:

• Joint campaign to ensure public expenditure on construction projects in the Highlands is maintained over the next three to four years
• Increase in spending on social/affordable housing;Pressure on banks to help private sector projects more
• Reduction in VAT
• Special assistance to enable companies to continue to employ and recruit apprentices.

He has written to the Leader of The Highland Council highlighting his concerns and underlining the need for a comprehensive plan of action to support the industry and prevent any further loss of jobs, skills or capacity.

Commenting on the results of the new survey, Scottish Building Federation Chief Executive Michael Levack said: "This survey of construction firms across the Scottish Highlands has produced highly worrying figures that suggest an industry that is still under significant pressure. Worst of all, things may yet get worse before they get better.

"I have written to The Highland Council calling for a joint campaign to help get the industry back on track. Through continued public expenditure on construction projects in the Highlands over the next three to four years, an increase in spending on social and affordable housing and special assistance to enable companies to continue to employ and recruit apprentices we can try to get the industry back on track."

He continued: "The Government also has an important role to play. We need proper support for the industry, by slashing VAT on building works and continued pressure on the banking sector to start lending again in order that we can get more private sector construction projects moving."

(GK/BMcC)