Builders' Merchants News

'Insolvencies dam fit to burst' as confidence slumps in Scotland

Published:  27 September, 2010

SCOTLAND: Confidence in the Scottish construction sector is now worse than it was at the beginning of 2009, according to the latest survey of building industry employers.

Scottish Building Federation chief executive Michael Levack raised fears of a “dam of insolvencies fit to burst” in the Scottish construction sector.

According to the latest Scottish Construction Monitor, a quarterly survey of the Federation's membership of more than 700 individual construction firms, industry confidence is down eight points compared to the previous quarter and has slipped by 17 points since the beginning of the year. It now stands at minus 37, worse than for the first quarter of 2009, when the economy was in the full grip of recession.

Completed by more than 80 individual Scottish construction firms, from sole traders up to major national contractors, the latest survey has also sought to gauge the quality of the relationship between individual firms and their bank and asked employers about their experience of securing finance for their business.

The survey found that only one-third of construction firms seeking bank finance for their business over the past year have been able to secure it on satisfactory terms with almost a quarter seeing their request for finance turned down.

Three-quarters of employers responding to the survey described their finances as 'secure' but said that the outlook for their business remains difficult. However, 14% said that without additional bank finance, their business would be forced to restructure or to lay off workers or could even struggle to survive.

Commenting on the findings, Mr Levack said: "It is also absolutely clear that restrictive lending practices and unaffordable credit continue to blight the industry and are one of the reasons why confidence remains so shaky and the prospects for recovery so uncertain."

"When it comes to government investment, we all know that the cupboard is bare. That makes it all the more frustrating that banks – some of the larger of which are majority-owned by the taxpayer – are failing to meet their obligations to increase business lending and help stimulate recovery in the private sector.

"Until that situation is resolved, with public sector cuts already feeding through to capital budgets, the short term prospects for many construction firms will remain extremely challenging."