SCOTLAND's business leaders have backed John Swinney's call for more capital spending, joining other groups in giving a broad welcome to the latest Holyrood Budget.

David Watt, of the Institute of Directors Scotland (IoD), said: "Scotland needs a Budget that supports growth. The Finance Secretary has announced a number of commendable initiatives, but we need to see more of the detail of the Budget to understand where the cuts have been made in order to fund these."

Backing new spending on homes and schools, he added: "The IoD supports UK public spending cuts, but these cuts need more focus and Westminster should support, in particular, Scotland's spend on infrastructure development, the 'shovel-ready projects'."

Mr Watt was not wholly supportive, adding: "As Mr Swinney noted, confidence in business investment is currently low, and overall I am not quite sure whether he is doing all he can to assist businesses in Scotland during economically difficult times.

"For example, is Scottish Enterprise and HIE getting more money for economic development?

"The construction sector is a vital segment of the Scottish economy. Figures announced in July showed the sector had retracted by 6.9%, which is extremely concerning. The £40 million pledged for the development of affordable housing, alongside the extension of the schools for the future programme, by a further 12 schools, will go some way to getting things back on track."

Andy Willox of the Federation of Small Businesses said: "Having highlighted the need to support the private sector to create new jobs on the scale now required, we welcome the £15m youth employment initiative.

"However, to work, it will need to be designed to meet the needs of the small and medium-sized businesses which make up the real Scottish economy and account for over half of all private sector employment.

"New capital spending is good, but, as Edinburgh businesses beset by tram woes will attest, public building projects aren't an automatic ticket to economic revival. Where and with whom the money spent is just as critical."

On non-domestic rates, he said: "It is great news the lifeline small business rates relief package has been retained. Similarly, business rate incentives to encourage commercial landlords to get empty premises back into use will be welcomed on the high street.

"When other overheads such as utilities and fuel are really cranking up the pressure on our small retailers, any help in reducing running costs gives businesses vital breathing space."

CBI Scotland's assistant director David Lonsdale said: "The Scottish Government's Budget contains a number of positive announcements on construction, tourism, skills, and incentives for firms to recruit young people. We also welcome the continued council tax freeze and the decision not to use the Scottish Variable Rate.

"However, this was a missed opportunity to signal a fresh direction on public service reform, through contracting-out the delivery of a far wider range of public services to the private sector, and to introduce an air route development fund in order to establish more direct links with key overseas business destinations.

"The lack of a moratorium on any new or additional taxes during the remainder of this Spending Review period is very disappointing, not least as Scottish ministers have already slapped £131m of extra taxes on business with their rates levies on larger retailers and firms with empty properties."

The most immediate boost for Scotland's struggling construction industry in the Budget is a £40m investment in affordable housing. The cash, which partly reverses a cut of £100m to this year's housing budget, will start to be spent before the new financial year begins in April.

Mr Swinney's announcement was backed by builders and housing campaigners alike.

Building industry body Homes for Scotland said the cash would make a real difference.

Chief executive Philip Hogg said: "No other industry has the potential to help the Scottish Government achieve so much across all of these policy areas.

"With such importance attached to it today by John Swinney, housing must be kept top of the political agenda."

Sarah Speirs, director of surveyors' body RICS Scotland, said the investment was "a positive step to combat the current housing shortage in Scotland".

Graeme Brown, director of Shelter Scotland, who has previously warned of a housing crisis in Scotland with 157,000 families on council waiting lists, said: "We have long called for a big increase in the numbers of socially rented homes.

"While the fact that more than 4000 were built last year is encouraging, we believe at least 10,000 new socially rented homes a year are needed to truly begin tackling Scotland's housing crisis."

Graeme Ogilvy, Scottish director of industry body ConstructionSkills, said: "We welcome any increase in building projects as the construction industry is a key sector and has a major impact on employment throughout the country.

"ConstructionSkills welcomes current proposals within the draft Procurement Reform Bill, which will see socio-economic benefits – such as training places – applied to public sector contracts, which will greatly help the sector."