Confidence in Construction Sector Drops
Confidence among employers in the construction sector has fallen back in the last quarter to levels similar to those in the first half of 2014, according to a report.
The latest Scottish Construction Monitor found confidence levels stood at +21 in the third quarter of the year, down 14 points from a record high of +35 in the previous quarter.
The drop follows three consecutive quarters of rising confidence but it was still the ninth consecutive quarter in which Scottish building employers' confidence has been rated positive overall.
The quarterly survey prepared on behalf of trade body the Scottish Building Federation (SBF) asked 50 construction firms: Overall, how would you describe your confidence in the economic prospects facing your business over the next 12 months, compared to the previous 12 months?''
A score is applied to each response and an average is then calculated. A result of +100 would indicate that all survey respondents were much more confident about future prospects while -100 would indicate they were all feeling much less confident.
SBF commercial director Ian Honeyman said: The decline in industry confidence this quarter underlines employer concerns about the long-term sustainability of the growth in construction output we've witnessed over recent months - and the growing issue of skills and capacity shortages within the industry.''
The survey also asked about employers' experience of being subject to performance guarantees or bonds as a condition of carrying out new work. The guarantees typically require the contractor to hold a defined percentage of the total contract value on deposit with their bank. This can then be paid to the client if the contractor defaults on the terms of its contract.
Mr Honeyman added: Our survey suggests that too many contracts are still subject to bank guarantees and this is having a negative impact on cash flow - particularly for smaller companies which can least afford to keep significant reserves of cash on deposit in their bank account.
Instead, we would like to see the industry move towards a situation where a standardised form of insurance backed guarantee becomes the norm.
This will give the client suitable protection against a contractor failing to fulfil its contractual commitments while reducing the barriers to particularly smaller construction companies tendering for larger contracts.''