CIVIL ENGINEERING - UK - JANUARY 2018

CIVIL ENGINEERING - UK - JANUARY 2018

Jan 2018 Mintel Industry ProfileN/A Price :
$ 1344

The way companies procure civil engineering firms to deliver work is changing, particularly in the utilities sector. Recent years have seen an increasing number of civil engineering companies enter into long-term partnerships and alliances with customers as utility companies look to form more collaborative relationships with suppliers. Alliances that last longer than the regulatory price control period are also becoming more common. 

More collaborative and integrated relationships with suppliers are increasingly sought as they facilitate the delivery of long-term objectives through the most efficient solutions possible, which should also help accelerate innovation in those sectors. The utility sector was previously focussed on delivering outputs during the five-year regulatory spending period. This shift is also supported by regulatory changes, with industry regulatory bodies, such as Ofwat and Ofgem, encouraging companies to adopt more long-term strategic planning

Table of Contents

EXECUTIVE SUMMARY
The market
Electricity and railways sector drive civil engineering construction activity in 2017
Figure 1: New civil engineering construction output in Great Britain, 2013-17
Electricity infrastructure sector has shown the strongest growth over the past five years
Figure 2: New civil engineering construction output in Great Britain, by sector, 2013-17
Outlook for civil engineering sector remains positive over the next five years, supported by renewed government commitment
Figure 3: Forecast new civil engineering construction output in Great Britain, 2017-21
Market factors
Government places infrastructure investment at the heart of ambitious plans to close the UK’s productivity gap
The largest sector in the current infrastructure and construction pipeline is energy
Companies
Trend towards long-term alliances and closer, integrated relationships in the utilities sector
Figure 4: Analysis of the civil engineering industry by type of activity, number of companies & of total, 2017
What we think
KEY INSIGHTS
What are the current government’s plans for infrastructure spending? Which sectors are set to drive infrastructure spending?
How is the government looking to address lagging productivity in the wider construction sector?
What are the potential implications of Brexit for UK infrastructure investment?
Is Brexit likely to exacerbate current labour skills shortages?
INTRODUCTION
Definitions
Methodology
Abbreviations
Market positioning
Figure 5: Total new construction and civil engineering output in Great Britain, 2013-17
UK ECONOMY
Overview
Figure 6: Forecast GDP development 2017-23
Figure 7: UK GDP quarterly development, 2004-17
Inflation
Interest rates
House prices
Figure 8: UK house price changes, 2006-17
Consumer spending
Manufacturing
Figure 9: UK manufacturing, 2014-17
Business investment
Figure 10: UK GFCF, chained volume measures, seasonally adjusted, 2004-17
Imports
Exports
MARKET FACTORS
Water & sewerage
Industry regulation
Legislative environment
European Water Framework Directive (WFD)
Urban Waste Water Treatment Directive (UWWTD)
The Drinking Water Directive
Revised Bathing Water Directive
Implications of Brexit on the UK water and sewerage sector
Transfer of private sewers in England and Wales
The Flood and Water Management Act 2010
Water and sewerage retail competition opens up for all business customers in England in April 2017
Gas & electricity
Price controls
UK energy policy
UK committed to reducing carbon emissions by 80% below 1990 levels by 2050
The government remains committed to tackling climate change despite Brexit vote
New government policies urgently needed to achieve long-term emission reduction goals
Government publishes long-awaited Clean Growth Plan in October 2017
Levy Control Framework
Renewable Energy Obligation (RO)
Feed-in-Tariffs (FITs)
Government commits to fresh FIT review before end of 2017
Contracts for Difference (CfDs)
First CfD auction concludes in February 2015
Second CfD auction winning bids dominated by offshore wind, which has seen a dramatic fall in costs
Next CFD auction scheduled for Spring 2019
Annual Capacity Market auctions are held to help secure the UK’s energy supply
Airports
Communications
Railways
Rail network funding and regulation
Sir Peter Hendy’s re-plan for Network Rail’s enhancement programme 2014-19
The Shaw report
Drivers of investment in rail industry
Additional funding for rail infrastructure announced in 2016 autumn statement
Rail sector announcements in Autumn Budget 2017
High Speed Two (HS2) and proposed major schemes
Ports & harbours
Roads
MARKET SIZE & SEGMENTATION
Key points
Market size
Figure 11: Civil engineering construction output in Great Britain, 2013-17
Figure 12: Civil engineering construction output in Great Britain, 2013-17
Market segmentation
Figure 13: Civil engineering construction output in Great Britain, by sector, 2013-17
Figure 14: Civil engineering construction output in Great Britain, by sector, 2013 and 2017
WATER & SEWERAGE SECTOR
Key points
Water & sewerage capital expenditure
Figure 15: UK capital expenditure on water and sewerage services, 2010/11-2014/15
Figure 16: UK capital expenditure on water and sewerage services, 2015/16-2016/17
Water civil engineering construction output
Figure 17: Civil engineering construction output for the potable water industry in Great Britain, 2013-17
Sewerage civil engineering construction output
Figure 18: Civil engineering construction output for the sewerage industry in Great Britain, 2013-17
ELECTRICITY SECTOR
Key points
Electricity distribution capital expenditure
Gross capital expenditure
Figure 19: UK gross capital expenditure by electricity distribution network operators, 2011/12-2016/17
Figure 20: UK gross capital expenditure by the electricity distribution network operators, 2012/13-2016/17
Figure 21: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16
Smart grid development to support low-carbon economy
Recent years have seen rapid increase in distributed generation connected to DNOs’ networks
Figure 22: Distributed Generation connected to the distribution network during DPCR5, 2011-15
Figure 23: Distributed Generation connected to the distribution network, 2015/16
Electricity transmission capital expenditure
Figure 24: Size of electricity transmission network in Great Britain, 2017
Figure 25: Capital expenditure by the electricity transmission industry in Great Britain, 2012/13-2016/17
Figure 26: Capital expenditure by the electricity transmission industry in Great Britain, 2012/13-2016/17
The electricity generation mix
Figure 27: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2011-16
Figure 28: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2016
Renewables generation
Figure 29: Renewable electricity generation in the UK, 2011-16
Offshore wind
33 offshore wind farms operational in UK
UK is leading offshore wind market in Europe
Offshore wind sees significant cost reductions
Result of second CfD auction reveals further cost reductions for offshore wind
Coal generation
Nuclear generation
Figure 30: UK nuclear sites planned closure dates, as of December 2017
Planned new nuclear power development marred by major delays
Gas/CCGT generation
Government to prioritise new gas-fired power stations
Distributed generation
Interconnectors
Figure 31: Existing and planned interconnectors, as of June 2017
Electricity civil engineering construction output
Figure 32: Civil engineering construction output for the electricity industry in Great Britain, 2013-17
Figure 33: Civil engineering construction output for the electricity industry in Great Britain, 2013-17
GAS SECTOR
Key points
Industry overview
Gas capital expenditure
Figure 34: Total gas transmission and distribution capital expenditure, 2012/13-2016/17
Figure 35: Total gas transmission capital expenditure, 2012/13-16/17
Figure 36: Total gas distribution capital expenditure, 2012/13-2016/17
Figure 37: Total gas transmission and distribution capital expenditure, 2012/13-2016/17
Replacement expenditure (Repex)
Figure 38: Length of iron gas mains replaced, by distribution network operator, 2011-16
Civil engineering construction output
Figure 39: Civil engineering construction output for the gas industry in Great Britain, 2013-17
AIRPORTS SECTOR
Key points
Figure 40: 10 largest airports in the UK, 2011-16
Figure 41: Civil engineering construction output for the air transport industry in Great Britain, 2013-17
Figure 42: Civil engineering construction output for the air transport industry in Great Britain, 2013-17
COMMUNICATIONS SECTOR
Key points
Figure 43: Key market developments in the telecoms sector, 2011-16
Mobile networks
Broadband networks
Figure 44: Civil engineering construction output for the communications industry in Great Britain, 2013-17
Figure 45: Civil engineering construction output for the communications industry in Great Britain, 2013-17
RAILWAYS SECTOR
Key points
Capital expenditure
Network Rail embarks on largest rail enhancement and investment programme in CP5 2014-19
Figure 46: Analysis of enhancement expenditure in Great Britain, by type, 2016-17
Figure 47: Renewal expenditure by asset, 2016 and 2017
Figure 48: Private sector investment in track and signalling, 2013-17
Figure 49: Private sector investment in stations, 2013-17
Railways civil engineering output
Figure 50: Civil engineering construction output for the rail transport sector in Great Britain, 2013-17
HARBOURS SECTOR
Key points
Overview
Recent port expansion projects
Figure 51: Civil engineering construction output for the harbours and waterways sectors in Great Britain, 2013-17
ROADS SECTOR
Key points
Overview
Figure 52: Road network in Great Britain, by type, 2016
Figure 53: Road network expenditure in England, by activity and road type, 2011/12-2015/16
Figure 54: New construction and improvements of roads, motorways and all purpose trunk roads, in England, 2012/13-2016/17
Progress and challenges with the road investment strategy
Figure 55: Civil engineering new road construction output in Great Britain, 2013-17
Figure 56: Civil engineering new road construction output in Great Britain, 2013-17
SEASONALITY OF CIVIL ENGINEERING CONSTRUCTION OUTPUT
Overall
Figure 57: Seasonality of civil engineering, 2012-16
Water
Figure 58: Seasonality of civil engineering output in the water sector, 2012-16
Sewerage
Figure 59: Seasonality of civil engineering output in the sewerage sector, 2012-16
Electricity
Figure 60: Seasonality of civil engineering output in the electricity sector, 2012-16
Gas, communications and air transport
Figure 61: Seasonality of civil engineering output in the gas, communications and air sector, 2012-16
Railways
Figure 62: Seasonality of civil engineering output in the railways sector, 2012-16
Harbours
Figure 63: Seasonality of civil engineering output in the harbours sector, 2012-16
Roads
Figure 64: Seasonality of civil engineering output in the roads sector, 2012-16
REGIONAL CIVIL ENGINEERING CONSTRUCTION OUTPUT
Figure 65: Analysis of civil engineering output, by region, 2012-16
INDUSTRY STRUCTURE
Key points
Industry development
Figure 66: Analysis of the civil engineering industry by type of activity and company size, 2017
Company profiles
AMEC FOSTER WHEELER
Transformation programme sees Amec Foster Wheeler sell non-core assets
Amec Foster Wheeler acquired by Wood Group in October 2017
Company outlook:
Figure 67: Financial analysis of AMEC Foster Wheeler, 2012-16
AMEY
Recent acquisitions
Amey UK launches transformation programme in 2016
Key contract wins in 2016
Figure 68: Financial analysis of Amey UK, 2012-16
BALFOUR BEATTY
Build to Last transformation programme launched in 2015
Figure 69: Financial analysis of Balfour Beatty, 2012-16
Figure 70: Financial analysis of Balfour Beatty by segment, 2015-16
LAND LEASE CONSTRUCTION
Company strategy and outlook:
Figure 71: Financial analysis of lend lease construction (Europe), 2012-16
THE COSTAIN GROUP
Company strategy and performance
Figure 72: Financial analysis of Costain Group, 2012-16
Figure 73: Turnover analysis of Costain Group, by division, 2014-16
JOHN LAING
Company outlook:
Figure 74: Financial analysis of John Laing, 2012-16
CARILLION
Carillion issues three profit warnings between July and September in 2017
Figure 75: Financial analysis of Carillion, 2012-16
J MURPHY & SONS
Company outlook:
Figure 76: Financial analysis of J Murphy & Sons, 2012-16
BAM NUTTALL
Company performance and outlook:
Figure 77: Financial analysis of Bam Nuttall, 2012-16
INTERSERVE
Strategic focus in 2017
Interserve issues profit warning in September 2017
Figure 78: Financial analysis of Interserve, 2012-16
Figure 79: Turnover segmentation of Interserve, 2016
SKANSKA UK
Skanska’s 2020 business plan:
Figure 80: Financial analysis of Skanska UK, 2012-16
MCNICHOLAS CONSTRUCTION HOLDINGS
Kier acquires McNicholas Construction (Holdings)
Company performance:
Figure 81: Financial analysis of McNicholas Construction (Holdings), 2012-16
GALLIFORD TRY INFRASTRUCTURE
Galliford Try pulls out of bidding for large fixed-price infrastructure projects in 2017
Figure 82: Financial analysis of Galliford Try Infrastructure, 2012-16
MARKET FORECAST
Key points
Market overview
Figure 83: Forecast civil engineering construction output in Great Britain, 2018-22
Figure 84: Forecast civil engineering construction output in Great Britain, 2017-21
Infrastructure investment at the heart of the government’s plans to close the UK’s productivity gap
Infrastructure investment named as one of the five foundations of the government’s Industrial Strategy
Independent Infrastructure Commission to help ensure the timely delivery of major infrastructure projects
Government launches productivity programme for infrastructure
Government extends UK Guarantee Scheme to attract private investment in infrastructure projects
Conservative government in support of Private Finance schemes
National Infrastructure & Construction Pipeline
Figure 85: National Infrastructure and Construction Pipeline, by sector, as of autumn 2017
Figure 86: National Infrastructure and Construction Pipeline, by sector, as of autumn 2016
WATER & SEWERAGE SECTOR FORECAST
Key points
Capital expenditure
England & Wales - AMP6 2015-20
Move towards long-term alliances and frameworks across industry
Figure 87: Total expenditure (Totex) allowance for AMP6 in England & Wales, by water & sewerage company, 2015/16-2019/20
Major water & sewerage capital projects in pipeline
Figure 88: Water & sewerage infrastructure pipeline, as of autumn 2017
Thames Tideway Tunnel
Figure 89: Estimated cost of Thames Tideway Tunnel, 2016/17-2021/22+
Water industry development
Figure 90: Forecast civil engineering output for the water sector, 2018-22
Sewerage industry development
Figure 91: Forecast civil engineering output for the sewerage sector, 2018-22
ELECTRICITY SECTOR FORECAST
Key points
Electricity infrastructure projects in the National Infrastructure and Construction Pipeline
Figure 92: Electricity infrastructure pipeline, as of autumn 2017
Electricity distribution capital expenditure
Figure 93: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
Drivers for future capital investment in electricity transmission network
Tentative signs of investor confidence returning in the UK renewables sector
Renewables capacity development pipeline
Figure 94: Renewable energy projects in pipeline, by technology, as of September 2017
Electricity civil engineering construction forecast
Figure 95: Forecast civil engineering output for the electricity sector, 2018-22
Figure 96: Forecast civil engineering output for the electricity sector, 2016-20
GAS SECTOR FORECAST
Key points
Gas infrastructure projects in the National Infrastructure and Construction Pipeline
Figure 97: Gas distribution and transmission infrastructure pipeline, 2017-21
UK gas supply
Figure 98: Existing UK gas import infrastructure, as of November 2017
Figure 99: Proposed UK import projects, as of November 2017
Gas distribution & transmission capital expenditure
Innovation at centre of new price control model for gas distribution and transmission network
Gas network operators to face tougher price controls from 2021
Transmission network
Figure 100: Annual capital expenditure plans by National Grid Gas under RIIO-T1, by category, 2014-21
Distribution network
Figure 101: Annual capex plans under RIIO-GD1, by GDN, 2014-21
Figure 102: Annual repex plans under RIIO-GD1, by GDN, 2014-21
Figure 103: Forecast total capex and repex during RIIO-GD1, 2013/14-2020/21
Civil engineering construction output forecast
Figure 104: Forecast civil engineering construction output for the gas sector, 2018-22
AIRPORTS SECTOR FORECAST
Key points
Industry development
Figure 105: Forecast civil engineering output for the airport transport sector, 2018-22
COMMUNICATIONS SECTOR FORECAST
Key points
Government commits £1 billion of funding for digital communications
Communications infrastructure projects pipeline
Figure 106: Communications infrastructure pipeline, 2018-21
Figure 107: Forecast civil engineering output for the communications sector, 2018-22
RAILWAYS SECTOR FORECAST
Key points
Capacity constraints driving rail infrastructure investment
Rail infrastructure projects pipeline
Figure 108: Rail infrastructure pipeline, as of autumn 2017
Figure 109: Rail infrastructure projects pipeline, 2017
Additional funding for rail infrastructure announced in 2016 autumn statement
Rail sector announcements in Autumn Budget 2017
High Speed Two (HS2) and proposed major schemes
Figure 110: Forecast civil engineering construction output for the rail sector, 2018-22
HARBOURS SECTOR FORECAST
Key points
Growth in off-shore wind farm developments offers opportunities to UK ports
Strategic review of east coast port facilities
Figure 111: Forecast civil engineering construction output for the harbours sector, 2018-22
ROADS SECTOR FORECAST
Key points
First Road Investment Strategy, spanning April 2015 to March 2020, signals the biggest investments in roads since the 1970s
2015 autumn statement
2016 autumn statement
Autumn budget 2017
Second Road Investment Strategy in development
Reform of Highways Agency
Figure 112: Forecast civil engineering construction output for the roads sector, 2018-22
Figure 113: Forecast civil engineering construction output for the roads sector, 2018-22
FURTHER SOURCES & CONTACTS
Association of Consulting Engineers
Civil Engineering Contractors Association
Institution of Civil Engineers
Trade magazines
Building
Civil Engineering Surveyor
Construction News
International Railway Journal
Modern Railways
New Civil Engineer
Plant & Civil Engineer
Railway Gazette International
Rail Professional
Water & Sewerage Journal
Utility Week
Trade exhibitions
Infrarail 2018
Traffex 2019

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