The flow of project starts has weakened in recent months in the run up to next week’s referendum, leaving the value of project starts for the first eight months of the year 2% down on the same period of 2013. The dip in starts is in contrast to the strong growth seen during 2013 and the opening months of this year and has been led by drop off in private non-residential projects as private sector investors defer decisions until after next week’s vote.
Pre-referendum uncertainty also appears to be depressing the flow of private sector projects in Scotland securing detailed planning approval. The value of project securing detailed planning approval in Scotland grew by 7% and 6% in 2012 and 2013 respectively. However, overall the value of projects securing detailed planning approval during the first seven months of 2014 was unchanged on a year ago.
In particular there has been a reversal in the recent strong growth in industrial and commercial approvals, with the value of industrial, office and retail projects granted planning 43%, 24% and 59% lower respectively. Investor nervousness does not appear to have spread to the housing market, however, with private housing approvals 59% higher than a year ago.
Value of Project securing detailed planning approval in Scotland
|
£million |
Private Housing |
Social Housing |
Industrial |
Offices |
Retail |
Hotel & Leisure |
Education |
Health |
Community & Amenity |
Infra- structure |
Utilities |
Total |
|
2010 |
639 |
301 |
149 |
194 |
136 |
208 |
508 |
137 |
71 |
185 |
518 |
3,047 |
|
2011 |
606 |
289 |
189 |
185 |
179 |
260 |
416 |
116 |
45 |
187 |
558 |
3,030 |
|
2012 |
648 |
269 |
333 |
264 |
150 |
336 |
393 |
90 |
90 |
60 |
619 |
3,253 |
|
2013 |
661 |
231 |
394 |
263 |
202 |
196 |
346 |
171 |
116 |
126 |
750 |
3,457 |
|
2014 Jan to Jul |
494 |
164 |
151 |
108 |
60 |
144 |
302 |
92 |
15 |
25 |
284 |
1,839 |
|
Change on a year earlier |
||||||||||||
|
2011 |
-5% |
-4% |
27% |
-5% |
32% |
25% |
-18% |
-15% |
-37% |
1% |
8% |
-1% |
|
2012 |
7% |
-7% |
76% |
43% |
-16% |
29% |
-6% |
-22% |
101% |
-68% |
11% |
7% |
|
2013 |
2% |
-14% |
18% |
-1% |
34% |
-42% |
-12% |
91% |
28% |
111% |
21% |
6% |
|
2014 Jan to Jul |
59% |
89% |
-43% |
-24% |
-59% |
-1% |
131% |
-3% |
-84% |
-33% |
-26% |
0% |
Source: Glengian N.B. Excludes projects with a construction value of £100m or more
The decline in private non-residential planning approvals and project starts is not a direct vote of confidence for or against an independent Scotland. Rather, the drop in activity, which follows a relative positive performance in 2013, appears to reflect investors’ temporarily deferring decisions due to political and economic uncertainty ahead of the next week’s vote.
The danger is that these uncertainties persist following the referendum. Commenters have raised concerns that firms headquartered outside of Scotland may reassess their investment plans in the event of a Yes vote next week. However, construction product manufactures supplying the UK market from Scotland face similar pressures.
In the event of a Yes vote it will be important that the key economic issues, from the currency to the operation of energy markets, are quickly resolved in order to provide the private sector with the confidence to press ahead with planned investments.