Confidence in construction sector affected by Brexit

The quarterly Scottish Construction Monitor survey found 57% of building contractors believe the process of leaving the EU is likely to drive up labour costs over the next five years.

The overall rating for confidence in the sector, drawn from employers' views on business prospects over the next year, fell three points to -6.

The last time a positive overall confidence rating was recorded was in summer 2017.

Scottish Building Federation managing director Vaughan Hart said: 'One key impact of the Brexit process for Scottish construction employers will certainly be the availability of skills and labour from other EU member states - and related to this, future labour costs.

'With only around 4% of the workforce coming from other EU member states, the Scottish industry is less directly exposed to this impact than other regions of the UK, particularly London, where around half of the local construction workforce is made up of non-UK EU nationals.

'However, the indirect impact on labour costs within the Scottish industry could be much more considerable. An exodus of EU nationals from London's construction sector could be a significant drain on the availability of labour and skills here in Scotland as more Scottish workers relocate to take advantage of job opportunities down south.

'In that context, I think our members are rightly concerned that the Brexit process could drive up labour costs for them over the next five years. Combined with declining industry output across the UK, it's therefore also unsurprising that general confidence amongst employers about the future outlook for the industry remains weak.''

Meanwhile, a separate report by the Bank of Scotland found business confidence increasing, particularly in the transport and manufacturing sectors.

The latest business barometer from the Bank of Scotland found overall confidence rose to 30% in April, 18% up on the previous month.

The transport sector showed the strongest confidence for business over the next year at 56%, followed by communications at 47%, and manufacturing at 40%.

The monthly barometer questions 1,200 businesses to detect economic trends across the UK.

Fraser Sime, regional director at Bank of Scotland, said: 'It's encouraging to see firms in Scotland growing in confidence, especially given the challenging business environment.

'The rise in positivity was the biggest of any UK region, which bodes well for Scotland's prospects during 2018, though we still expect levels to fluctuate through the year.

'The fact that a significant number of firms expect to recruit more staff, and that this figure is steadily growing, is a good indication that businesses are planning for growth with cautious optimism.'