The construction industry is vitally important to the Scottish economy. It employs over 220,000 people, with around 90% of these being skilled professionals and contributes more than £12 billion to the Scottish economy each year, representing about 10% of Scotland’s GDP. For comparison purposes this is twice the contribution of the agricultural sector and almost three times that of the combined utility services.

In employment terms 45% of all construction apprentices are trained in Scotland, with over 4,000 new apprentices each year, if the electrical and plumbing trades are included. The construction industry is estimated to require 6,320 new recruits each year until 2012 to meet projected demand.

The Scottish construction market was valued at an estimated £10,751m in 2008, an increase of 2% on the level reached in 2007. Trends in market size and forecast growth rates are illustrated in the chart above.

The output of the Scottish construction industry expanded steadily from £7,676m in 2003 to £10,751m in 2008, although the rate of growth was moderating throughout the period. Annual growth rates in the 2003-2006 period averaged nearly 12%, but growth slowed significantly to 2% in both 2007 and 2008.

New work has always formed the major part of construction output and had grown from 61% of the sector in 2002 to around 66% in 2007. However, this proportion declined to 64% in 2008 and is likely to decline further in the next few years, as the recession impacts more significantly on new construction projects.

Housing activity accounted for 41% of the total construction industry output in 2008, compared to 40% in 2002 though this figure is expected to increase to 42% by 2013.

Housing RMI, new Private Commercial work and Private New Housing together account for 54% of all construction work in Scotland at the present time, with 19%, 18% and 17% of activity respectively.

Private new commercial output currently accounts for around 18% of total construction output in Scotland and is the second largest sector in the industry. Output has grown steadily since 2003 to reach £2,129m by 2007, but declined in 2008.

Projections formulated in 2008 suggested that strong infrastructure output growth of 4.1% annually between 2008 and 2012 was likely to be a driving force behind construction growth for Scotland. This included the Scottish Government’s £3 billion Transport Investment Programme and large scale regeneration projects, including the development of a new town at Ravenscraig. The Scottish Government has also set a target of 35,000 new homes annually by 2015.

The economic circumstances facing Scotland and the UK, are very hard to gauge at the present time. Nevertheless, it is estimated that total construction work will decline by 8% in the current year, will remain virtually static in value terms in 2010, before increasing by 5-6% in the following years, to reach a value of £11,635m by 2013.