Small and medium construction firms across Scotland have enjoyed strong growth in the second quarter of 2018, according to the Federation of Master Builders (FMB) Scotland.

Despite significant company collapses and job losses, the results of the FMB's latest State of Trade Survey show promising results.

According to the survey the main indicator for the performance of Scottish construction SMEs (a measure of workloads, enquiries and expected workloads), rose strongly by 17 percentage points in Q2 2018, to +24%. The workloads for SME builders also rose, with the proportion of firms that reported higher workloads growing compared to Q1 2018 (41% vs 32%).

However more than three quarters of builders expect material prices to continue to rise; and more than half of firms (60%) are struggling to hire carpenters and joiners, with 45% struggling to hire plumbers.

Gordon Nelson, Director of FMB Scotland, said: "The second quarter of this year carried a lot of bad news for the Scottish construction industry with the loss of hundreds of jobs after some well-known firms collapsed. However, beneath these headlines, the outlook for most small construction firms has remained relatively bright. The positive reports from construction SMEs in the first quarter of 2018 have not only been sustained into the second quarter, they have improved significantly. This performance is all-the-more remarkable considering the serious headwinds facing the sector. As our research demonstrates, rising material costs and the scarcity of skilled tradespeople continue to batter what is proving to be a highly resilient industry, at the same time as the economic uncertainties of Brexit loom just around the corner

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"However, this resilience will not last indefinitely and the Scottish Government needs to ensure that the industry is not knocked off its stride by the unintended consequences of its latest policy proposals. The recent publication of the Scottish Government's consultation on implementing the Barclay business rates review has already rung alarm bells. The proposed new tax on out-of-town businesses is set to apply to all firms, and could conceivably hit small construction firms with offices and storage facilities located on the outskirts of towns.

"In addition, many builders are concerned about the direction of the Planning Bill with an amendment on third party, or 'equal', right of appeal expected to come forward. If this does emerge, it would exacerbate the current planning delays experienced by builders and heap significantly more risks upon their businesses. Small construction firms are the backbone of what is a key industry for Scotland's economy. The Scottish Government must make sure it is not unintentionally shackling them."

(CM/MH)