THE Scottish construction sector faces an uncertain future, with more than a third of firms concerned they won’t be able to trade into 2025, according to a new report from business advisory firm FRP.
Of the senior decision makers surveyed across the Scottish sector, 36% say that they aren’t confident that they will be able to trade through the next 12 months1.
Tax burdens are a major concern for businesses, with just over three quarters (76%) of respondents admitting they will struggle to pay their tax liabilities or any outstanding tax in full this year. Meanwhile, nearly three quarters (72%) flag that political uncertainty in an election year is either causing them to delay investments or prompting clients to postpone commissioning new work.
Firms also say labour (12%) and energy costs (14%) are likely to damage their prospects, while more than half (56%) of Scottish firms say it was harder to secure the funding they needed last year, compared to the year before.
In response to the headwinds they face, the country’s construction companies are planning a range of actions to bolster their businesses, including re-negotiating contracts (22%), selling off assets like machinery and switching to leasing them instead (22%), and increasing their own prices (18%).
More positively, 38% say they expect to grow profits in the year ahead, while 32% expect to grow revenues.
Michelle Elliot, Restructuring Advisory Partner at FRP in Glasgow, said: “Inflation, heightened interest rates, and supply chain disruption are all factors that have worked against businesses in the construction sector and strained bottom lines. While we’ve already seen positive signs of improvement in economic conditions this year, and are expecting further slowdowns in inflation and interest rate cuts soon, firms will be carrying the scars of these difficult conditions for some time to come. It will take months, if not years, for the full impact of these headwinds to play out.
“That being said, Scotland’s construction sector has always shown itself to be tenacious and creative in finding solutions to persistent challenges – and our findings shows this tenacity in action. Continued proactivity in seeking solutions to pressures, coupled with a willingness to seek advice and help at the first signs of trouble, will put businesses in the strongest position to navigate the road ahead, and make the most of any fresh tailwinds that come along.”
The proportion of Scottish businesses that lack confidence in their ability to trade over the next 12 months was in line with the average across UK nations and regions surveyed (both 36%).
Looking across the UK, the East Midlands and North East of England report the largest proportion of firms pessimistic about their prospects, with 64% and 45% respectively uncertain they will make it through the next year. The South West (20%) and North West (24%) of England have the most optimistic construction sectors, although still host sizeable proportions of businesses fearing for their future.
To read FRP’s full report, click here
