Leaders of the Scottish Building Federation have issued a last minute plea to Chancellor George Osborne to consider the huge impact on construction employment ahead of next week’s spending review.

In a letter to the Chancellor, the Federation’s Chief Executive Michael Levack suggests the effects of a projected 40% cut in Scotland’s capital budget between 2009/10 and 20014/15 would be ‘highly counterproductive’ and could undermine attempts to build a sustainable economic recovery.

The letter highlights official statistics from the past two years which show that between 2008 and 2009 Scottish construction industry output fell by £1.7bn while 42,000 people directly employed in the industry lost their jobs.

Over that period, the Federation estimates that a further 8,000 Scottish jobs dependent on the industry would also have been lost.

Recent estimates predict that Scotland’s capital expenditure is likely to fall by 40% or £1.6bn over the next five years.

The federation’s analysis of official statistics on industry employment and output suggests that for every percentage point reduction in capital investment an additional 1,200 jobs could be lost.

The letter to the Chancellor also warns that any signs of recovery in private sector construction remain “fragile” and urges the introduction of “targeted measures to stimulate private sector construction activity” to compensate for “any cuts in capital investment that are deemed to be unavoidable”.

Levack said: “We remain extremely concerned about the potential impact of such significant cuts in Scotland’s capital budget on employment in the construction industry.

“By analysing recent official statistics, we have attempted to quantify what that impact is likely to be. It amounts to a loss of jobs equivalent to roughly one quarter of the current workforce. Clearly, the hope must be that a proportion of this loss will be compensated by a rise in investment from the private sector.

“At the moment, however, our concern is that any recovery in private sector construction activity remains very fragile.

“Therefore, if the Government is telling us that funding cuts of the scale predicted are unavoidable, incentives must be introduced to stimulate recovery in the private sector. Otherwise, we could see a net loss in total industry employment dangerously close to the 47,000 job figure we have highlighted to the Chancellor.”