What ails Scottish housebuilding?
Scot-Buzz editor Bill Jamieson has some suggestions for a cure...
Scotland has every reason to be a housebuilding leader – and the industry a leader in economic upturn and recovery. But instead the industry is mired in problems, from cash constraints through planning hold-ups to ever rising regulation.
The result? Instead of a building resurgence we have glacial growth. Instead of more “affordable homes” we are legislating for ever more expensive ones. Instead of greater creativity, innovation and imagination in design, there is a retreat into the same and the lookalike.
Latest Scottish government figures testify to the moribund state of the industry.
Eight years ago annual housing completions in Scotland were running at almost 26,000. But for the year to end September 2012, that figure had slumped to 15,046 – a 41 per cent slide.
Output is at its lowest level since 1947 and there are record insolvencies in the construction sector.
A recovery (of sorts) has set in. But it is glacial and fitful. The number of starts rose 11 per cent in the year to end September, though this reflects the notably low level of starts in the weather blighted fourth quarter of 2010. Scottish government figures for the latest quarter (2012 Q3) show the number of starts fell back by 10 per cent compared with the same period a year previously.
160,000 on waiting lists
Given the long waiting lists and the inability of young people to afford the first step on the housing ladder, council house building is woeful. Just 958 new council houses were started in 2012 and 1,096 completed. But there are 160,000 young people on waiting lists.
Councils are strapped for cash. Mortgage lending, while showing modest month-by-month recovery, is far below the levels of five years ago. There is resistance in many areas to new housing development. And many builders are deterred by the extra requirements and impositions being imposed by local authorities.
Regulatory barriers are not being lowered. They are being raised. Last week major trade bodies representing the home building, commercial property and construction sectors voiced their collective concern over Scottish government proposals to impose additional regulatory burdens.
These threaten to place Scotland at significant economic disadvantage in comparison to England and intensify the housing shortage.
Up to £10,000 added to building costs
Homes for Scotland, the Scottish Property Federation, Scottish Building Federation and Federation of Master Builders say more red tape and increased costs will make Scotland a more expensive and difficult country in which to invest and build.
The joint letter to Scottish government ministers points to the recent consultation on energy standards, with the Scottish Government’s own figures showing that proposed changes could add up to £10,000 on to the cost of building what are already highly energy efficient new homes.
Further demands on energy efficiency are also being made on new offices when they have already reduced their carbon emissions by 70 per cent compared to 1990.
The letter warns that any moves to further increase regulation will have significant impact, “not only in terms of the delivery of much needed new homes and jobs but also the wider range of policy areas which home building and the construction industry more generally supports.”
Enter a new “expert group”
As for opening up new avenues of finance by tapping pension funds, the administration has been “on the case” for two years – but with little effect. Only this week Deputy First Minister Nicola Sturgeon has announced an “expert group” to look at ways to attract additional finance to increase housing investment targeting pension funds and other institutions.
The group “will also identify and address any barriers to attracting this source of investment. This will involve engaging with house builders, investors and potential landlords to discuss ways to enable the delivery of rented accommodation across Scotland.”
The initiative is welcome, particularly when the number of new homes needed by 2035 is estimated at 465,000.
But why only now?
The picture is by no means totally bleak. Scots builders are capable of successful, innovative and imaginative new ventures, across both the public and private sectors.
The annual Homes for Scotland industry awards, due to be held on Friday May 17 celebrates many examples of excellence in Scottish housebuilding. A total of 87 submissions were received, up 10 per cent on the previous year and the highest total since the awards began in 2003.
Scotland does not lack outstanding exemplars in house building today, whether in energy efficiency, design, innovative use of materials and integration with the local environment.
What drives this industry forward – and what has historically always driven it forward - is its ability to create, innovate, adapt and inspire, to lift our aspirations for better designed, more attractive, more energy efficient, environmentally pleasing, lifestyle suited and desirable places in which to live.
So here are my four suggestions to boost recovery:
- Scotland should adopt the example down south of scrapping two existing regulations for every new one introduced.
- Legislation on energy efficiency should recognise the huge improvements already achieved and not blight the good in pursuit of the best.
- Councils should offer planning fee discounts and incentives for imaginative design and appearance.
- Engage the banks in consultations on new funding schemes and approaches and encourage venture capital involvement.
SCOTTISH EXPORTERS - WHY WE NEED TO DO MORE
One of the least explored issues in the independence referendum campaign was Scotland’s export performance, in particular exports to countries beyond the UK.
This was even more remarkable given the exhortations in the wake of the 2008-09 financial crisis to rebalance the economy towards manufacturing and in particular to exports.
According to the Global Connections Survey, Scottish international exports in 2012 (exc. oil and gas) were reckoned at £26 billion, up £1.4 billion (5.9 per cent) on 2011.
Of this, some £15.4 billion was by manufacturing sector companies and £8.7 billion by the service sector. Manufacturing sector exports increased by £1.1 billion (7.9 per cent) over the year and service sector exports increased by £465 million (5.6 per cent).
Such figures on their own might seem respectable enough. But not all Scot-buzz readers concur.
This from David Scrimgeour, a Scotss lawyer who has lived and worked in Germany for over 20 years. In the 1990’s he was the Scottish Government’s investment representative and in 2000 he founded DS Consulting to advise international companies and governments on strategy and business development:
Hi Bill
The Referendum debate underlined, in my view, the complete dependence of the Scottish economy on the English market and the City. But are there any new moves to internationalise Scottish business?
Scotland was threatened with company departures, mortgage cost increases, pension losses, share sales and runs on Scottish banks in addition to the removal of the currency. And yet, to date, there has been no discussion in Scotland of the obvious need to diversify the economy beyond British shores and to find new sources of finance and export markets in order to reduce these business and political risks.
And this is also despite the additional looming risk of a Brexit in a couple of years’ time. You would think that this would be an ideal policy issue for the SNP party to promote, especially for the Yes Generation.
SCDI has identified internationalisation as a key element for creating “a robust and sustainable economy” and notes the average export rate (i.e. outside of the UK) of Scottish companies is 7 per cent. This contrasts with the average in Bavaria of 50 per cent - and 73 per cent here in Munich.
So, despite the efforts of Scottish Enterprise over the years, international activity by Scottish SMEs in particular is dangerously low. The only consolation is perhaps that UK companies generally are no different but how comforting is that?
Best wishes
David
Export help for SMEs has long been a priority for the Scottish government and its agencies. And this letter well illustrates the need for these efforts to be encouraged and sustained. It would only be fair to point out that the headwinds created by continuing economic problems in the Euro-zone, particularly in the light of the latest IMF forecast downgrades. The 27-member currency zone is our largest export market outside rUK.
Meanwhile, what are the facts? Scotland’s two largest exporting industries in 2012, as in previous years, were manufacture of food & beverages (£4.7 billion) and manufacture of coke, refined petroleum and chemical products (£4.1 billion). These were followed by legal, accounting, management, architecture, engineering, technical testing and analysis (£1.7 billion), wholesale retail, repair of motor vehicles and motor cycles (£1.7 billion) and financial and insurance (£1.4 billion).
The US continues to be Scotland's top international export destination with an estimated £3.6 billion of exports, an increase of £235 million since 2011. Netherlands was the second top export destination with exports of £2.7 billion, although exports are estimated to have decreased by £340 million (11.3%) over the year. France is Scotland's third top export destination, estimated to be worth £2.2 billion, increasing by £455 million (26.4%) in 2012.
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EXPORT DATE FOR THE DIARY
SMEs looking for export opportunities should note the next big event: Explore Export on 10 November. It brings together 65 global commercial officers to Scotland to talk to companies on a 1-to-1 basis about the opportunities for trade and export in their own territories. Venue: Murrayfield Stadium. Admission free and more details at www.scottish-enterprise.com.
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What of SME export performance? Very problematic as David suggests, but all the more reason, perhaps, to remind ourselves of where success has been achieved and to learn lessons accordingly. Here are three worth highlighting:
•The isle of Arran Brewery has opened a company in the USA to boost exports into America. The company will not just be importing its own beers but will be importing other Scottish and other European Craft Beers into the US market, which grew by 18% in the last six months alone. Managing Director Gerald Michaluk Said “ We have had great support from Scottish Enterprise and STI as well as UKDTI in entering the US market and this major drive will see Arran Beers being available to beer wholesalers throughout the USA in 2015.” Independent Scots brewer BrewDog received support from SDI in finding new routes to market in different countries, introducing leads and presence at trade shows.
•Translation services agency Lingo24 received support through the Scottish Enterprise GlobalScots network. The company achieved £7 million in sales last year.
•Probe Test Solutions, supplying test hardware to semiconductor companies, received support to develop exports, finding local contacts in target markets in Russia and Eastern Europe, trade show support and funding support to employ an export manager.
Meanwhile, activity this year has included:
•A delegation of Scottish craft brewers has just completed a five day visit to the US and Canada led by Scottish Development International (SDI). The aim was to provide access to brewers, industry experts, buyers and importers.
•SDI has opened its first office in Africa, enabling the agency to double the number of companies it supports into the market to around 300 by 2014/15 and increase international sales to Africa beyond the current £2 billion mark.
•In May, three Scottish oil and gas supply chain companies expanded into the US market and opened new operations in Houston, Texas. A record number of Scottish oil and gas companies attended the Offshore Technology Conference (OTC) in Houston, almost half attending for the first time.
•In April a delegation of Scotland’s food and drink sector visited Singapore to explore export opportunities. Eighteen organisations took part, including leading brands such as Highland Spring, Paterson Arran, Highland Smoked Salmon and Mackie’s at Taypack as well as newer entrants such as Loch Ness Brewery, Garvies Soft Drinks and Burgon’s of Eyemouth.
Says Neil Francis, SDI’s International Operations Director, “If we want our companies and our economy to grow, we must increase the number of companies exporting for the first time, and help existing exporters increase the value of their exports.
“We need to raise the awareness and ambitions of companies to the benefits of international trade, help them to build their capability and capacity and support them to exploit the opportunities.
“We support companies with preparing to export workshops, online learning tools and case studies to develop robust international strategies. And we provide companies with access to the know-how and expertise including our specialists in our 29 international offices to explore key markets.”
Economy Forecast
22 Oct
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SHOPPERS SHUN BIG CHAINS FOR INDEPENDENTS
Encouraging news for high street entrepreneurs: independent shops, bars and cafés are opening at their fastest rate in years in a boost to the high street as customers shun the big retail chains.
According to the Local Data Company (LDC) and the British Independent Retailers Association (Bira), more independent stores opened in the last year than closed. While giants such as Marks & Spencer, Tesco and Sainsbury are still in the doldrums, Britain’s high streets are not suffering as badly as analysts have claimed.
Shoppers turned to local outlets in record numbers, with net openings of 432 in the last six months. That was the result of 8,662 new independent retailers opening and 8,268 shutting their doors.
Last week PwC and the LDC revealed that town centres had 964 net closures of all types of stores between January and September, but this was mainly due to the collapse of high-street chains, including Phones 4U and La Senza.
Said Matthew Hopkinson, director at the LDC, “The growth in independents, the ‘silent majority’, is a significant factor in preventing vacancy rates [the number of empty shops] rising in our town centres and also reflects the consumer response to a more personal and unique offer that many independents bring.”
E-cigarette shops, barbers and independent cafés and restaurants were among the largest type of store to open in towns, while independent clothes and shoe stores closed.
A rise in the number of shoppers heading to high-street independents was also highlighted by online sales growing at their slowest rate in more than a year, according to the British Retail Consortium and KPMG.
Online shopping rose 8.2% last month, compared with a three-month average of 13.8%. Clothing and footwear sales also fell online for the first time on record, as the warmest and driest September ever recorded meant that shoppers shunned autumn and winter collections.
David McCorquodale, the head of retail at KPMG, said: “The warm weather melted sales of clothing and footwear online, as shoppers chose to dig out their summer wardrobe rather than investing in new winter woollies. As the weather cools and people start planning for Christmas this trend should quickly reverse.”
In Scotland, you bet.
