Building the way out of the downturn
As chief executive of the Scottish Building Federation (SBF), Michael Levack believes the Scottish construction industry is often not given the recognition it deserves. As one of the key sectors of the Scottish economy, the industry is worth around £10 billion, contributing over 10% of the Scottish GDP and employing some 192,600 people.
With the industry among the worst affected in the economic downturn, Levack shares his thoughts on the future of the construction sector with Enterprising News.

EN: Construction has gone through a rough time - the SBF recently reported around 8,500 construction workers have lost their jobs in the first eight months of this year, but now there are slight signs of recovery. What should the Scottish construction sector expect to happen in the next twelve months?

ML: Unfortunately I do not think the outlook it particularly good for the next twelve months. Everyone is acutely aware of the constraints on public sector finance - the Scottish Government budget for the next couple of years is going to be extremely tight and this will have a knock-on effect on local authorities and other public sector bodies. We will now pay the price, to some degree, for the accelerated funding that was brought forward last year. Although we don’t want to appear ungrateful for that happening; I believe it has had little positive impact on the industry. A lot of money has gone into buying land or completed developments, rather than kick-starting new work on-site. This means that employment, including apprenticeship places, hasn’t been created and the industry hasn’t been protected.

There is also turmoil in the banking sector and it is going to take a considerable amount of time for the structural management organisation of banks to be sorted out and for it to settle down. That’s going to have a knock-on effect in terms of lending to the private sector. As a result, I believe very little will happen in the private sector.

The Scottish Future Trust (SFT) has recently been set up and is only just beginning to gather momentum now. I may have been perceived as being critical of the SFT in the past, but this is not the case. The SFT hasn’t had the opportunity to do anything yet; however I do think it is a massive opportunity and now is the time for them to actually start delivering.

EN: Recent statistics have shown that the UK economy contracted slower than previously thought in the second quarter, thought to be helped by a ‘resilient’ performance in the construction sector. Is this the case?

ML: I am fairly skeptical about some of the statistics that are coming out and I can’t believe that someone would say there has been a ‘resilient’ performance in the construction sector. From the discussions I have with our members all across Scotland, I know that is not the case. Right across the board, from major contractors down to sole traders, I am being told and seeing first-hand that things are very, very tough and they are getting tougher.

I believe that people are clutching at straws trying to see positive signs. When you see pieces in the papers like “house prices have risen by 1.2%”, or “the number of sales has gone up by 2%” – these are increases on such a small sample that they don’t have any credibility. The figures are being compared to the same period last month when they should be compared to 12 months ago, or 24 months ago.

EN: Is the Scottish Government doing enough to help construction firms? What more should be done?

ML: The business sector wants to see a bit of honesty from politicians, far more cooperation, without sounding politically naïve, between the parties at Holyrood, and more cooperation between Holyrood and Westminster. The business community is sick of all the score playing and the lack of clarity in what’s happening.

A construction business is the same as any other business at this time. It has to have a robust business plan, it has to use this to monitor itself and it has to communicate with its bank. It must be very difficult to prepare a credible business plan for the next 12 months, let alone the next three years or even five years, in the current climate. We need to have more certainty regarding what is going to happen with public sector funding. I would say to politicians, “give us the bad news, tell us straight”. The schools announcements are just smoke and mirrors, we need to know what projects can be funded and what the timescale for them going on-site is.

EN: Surely the Commonwealth Games coming to Glasgow spells good news for the industry. What is the SBF doing to ensure Scottish firms don’t miss out?

ML: All the companies of any size that are capable of taking on the contracts relating to the Commonwealth Games are aware of the opportunities that exist and the Commonwealth Games has an excellent online portal that can be used to track appropriate jobs of work.

The Commonwealth Games will create some work; they will have a positive effect on the industry and that is very welcome in these hard times - but this is not enough to cure the ills of the industry. Although there will be some work in Edinburgh, the majority will be focused in Glasgow. It is a drop in the ocean when you look at the industry as a whole.

EN: Are there enough opportunities for apprentices?

ML: We hear a lot of government and political announcements about apprenticeships but first and foremost you need work in order to be able to offer apprenticeships. Taking on an apprentice in the construction sector is a four year commitment, how can someone look ahead at the next four years and be confident that the work will be there?

I would like to see more support for employers to retain apprentices. Some funding measures have been put in place by the Scottish Government - such as a grant of £2,000 to take on a redundant apprentice – but I would like to see the Government offer prevention rather than cure.

I would like to see more support for businesses to retain apprentices. The Government has set a precedent within life sciences where they have put £30million into recruiting apprentices. They have also introduced a scheme within this sector where any business taking on two apprentices can have the second apprentice’s wages paid. I would like to see something similar introduced for construction.