CONFIDENCE among Scottish construction firms has fallen back from record levels recorded earlier in the year amid concerns about sustainability and skills.

The Scottish Construction Monitor, which is compiled by the Scottish Building Federation, said the confidence figure for the third quarter of the year was plus 21.

That is a 14 point fall from the record 35 reported for the three months to June.

Scottish Building Federation commercial director Ian Honeyman said: “The decline in industry confidence this quarter underlines employer concerns about the long term sustainability of the growth in construction output we’ve witnessed over recent months – and the growing issue of skills and capacity shortages within the industry.”

The latest research, compiled from the responses of 50 Scottish businesses with turnover ranging from less than £500,000 to more than £50 million, still marks the ninth consecutive quarter where the overall confidence has been positive.

The survey also asked firms about their experience of being subject to performance guarantees or bonds as a condition of starting a contract.

The guarantees typically ask for firms to have a percentage of the total contract value deposited at their bank.

That money can then be paid to the customer if the contractor defaults on the project in any way.

The research found 96 per cent of firms had been subject to this type of guarantee.

The Scottish Building Federation said it was concerned about the impact this was having on the cash flow of building companies, particularly at the smaller end of the market.

Mr Honeyman added: “Our survey suggests that too many contracts are still subject to bank guarantees and this is having a negative impact on cash flow – particularly for smaller companies which can least afford to keep significant reserves of cash on deposit in their bank account.

“Instead, we would like to see the industry move towards a situation where a standardised form of insurance backed guarantee becomes the norm. This will give the client suitable protection against a contractor failing to fulfil its contractual commitments while reducing the barriers to particularly smaller construction companies tendering for larger contracts.”