'Worrying' construction slowdown prompts concern over Scottish homes target

A dramatic levelling off in residential construction activity amid weaker demand is a worrying sign for Scotland’s ambitious housebuilding targets, according to a sector expert.

By Perry Gourley
Sunday, 12th June 2022, 4:55 am
The Scottish Government says it remains confident of hitting its new homes targets despite a slowdown in construction activity.
The Scottish Government says it remains confident of hitting its new homes targets despite a slowdown in construction activity.

Latest data from the Chartered Institute of Procurement & Supply (CIPS) last week showed activity on sites was close to stagnation in May, its worst performance for two years.

Ryan Gilluley, managing director of Lanarkshire-based GCM cost consultants, said successive coronavirus lockdowns, supply issues related to the pandemic and Brexit, and rising costs – particularly for fuel – were all factors in dampening demand.

He warned the figures show that residential developers are reducing their activity levels as a result of the economic slowdown and the cost-of-living crisis, including the rise in mortgage costs.

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However, the Scottish Government has insisted it is still on course to meet its long-term housebuilding targets of delivering 100,000 new affordable homes by 2032.

Gilluley said although the housebuilding sector is not necessarily representative of the construction industry as a whole, the figures are “worrying”.

“When residential construction activity starts to slow, the effects ripple out across the industry because of its scale and demand for resources.”

The Scottish Government published its first long-term housing strategy paper last May, setting out its plans for housing out to 2040.

Key priorities included delivering 100,000 more affordable homes by 2032, with at least 70 per cent of these being for social rent. This target would support about £16 billion in total investment and up to 14,000 jobs a year and set a single set of standards for housing quality and accessibility, no matter whether a home is owned or rented.

A Scottish Government spokesman said: “The affordable housing sector continues to show signs of recovery, with completions having risen by 35 per cent compared to the previous year to December 2020.

“However, we are aware that global issues around supply of materials and skilled labour, with the associated rises in cost, are affecting the pace at which homes are delivered.

“We will continue to collaborate across all our partners, local government and housing stakeholders to achieve our shared goal of delivering more affordable homes for Scotland.”

The CIPS monthly index registered a reading of 50.7 last month, its lowest level since May 2020.

The index indicates the proportion of construction purchasing managers reporting a rise in levels of work, with a score of 50 indicating no overall change.

Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey for CIPS, said: “Residential construction activity was close to stagnation in May, which represented its worst performance for two years, amid signs of softer demand and a headwind from low consumer confidence.”

The latest CIPS report also showed that rapid cost inflation continued during May, with almost three-quarters of survey respondents reporting a rise in purchasing prices due to rising fuel, energy and raw material costs.

However, the report also showed the overall rate of inflation eased to a three-month low.

GCM was founded in 2015 and works with subcontractors and developers across the construction and engineering sectors.