UK Construction Rebounds From Slow November

UK construction companies ended 2015 with a robust and accelerated expansion of overall business activity, according to the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ).

The Index registered 57.8 in December, up from a seven-month low of 55.3 in November. Higher levels of construction output have been recorded by the survey since May 2013, but the overall rate of expansion remained slightly weaker than seen on average over this period.

Commercial construction remained the best performing sub-category of activity in December, with the latest upturn the fastest since October 2014.

Housing activity also increased at a robust rate that was much stronger than the 29-month low seen during November. Anecdotal evidence cited an improving flow of development opportunities and new invitations to tender. Meanwhile, a fall in civil engineering activity was only marginal, but this ended a seven-month period of sustained growth.

Just over half of the survey panel (51%) anticipate a rise in business activity over the course of 2016, while only 7% forecast a reduction. Although this indicated the weakest degree of positive sentiment since February, the index remained well above its post-crisis average. Survey respondents noted that greater client budgets, improving economic conditions and a strong pipeline of new projects had underpinned business confidence in December.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI® , said: “UK construction companies finished 2015 in a positive fashion, as overall output growth recovered from November’s seven-month low. Across the UK construction sector as a whole, the latest survey indicated a strong degree of optimism about the outlook for 2016, with firms mainly citing a strong pipeline of commercial development projects and new housing starts. There were also reports that sustained improvements in UK economic conditions had led to upbeat expectations for clients’ budget setting for the year ahead.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “With both new orders and general business activity on the rise, this month saw a considerable spike in purchasing activity and the second fastest increase since January 2015, amidst an environment where suppliers struggled more as lead times lengthened.

“Though commercial activity was the main driver of growth, the housing sub-sector remained strong, rejecting the previous 29-month low and showing solid steady increases overall since February 2013. Hirings in the construction sector also bounced back from November’s 26- month low and sub-contractors remained in demand to support increased workloads.

“This was a welcome surprise to the end of the year. The perfect conditions of lower commodity prices, helping bring cost inflation close to April’s six-year low, and a supportive UK economy have given the sector a solid foundation to build on with continued positive sentiment for the year ahead.”

Utilities Construction Market Report – UK 2015-2019 Analysis

AMA Research have published the 5th edition of the report ‘Utilities Construction Market Report – UK 2015-2019 Analysis’. This report incorporates original input and primary research, and represents an up-to-date and perceptive review of the market and its development. It includes a review of recent market trends and forecasts for the utilities construction market over the next few years.

Key areas covered:

• Detailed assessment of the market – analysis of market structure and recent developments in the market, with forecasts to 2019.

• Water sector analysis – market size, capital investment, water and sewerage construction output, key developments, leading providers.• Electricity sector analysis – market size, capital investment, construction output, influence of renewables, growth prospects into the medium term. • Gas & Telecoms sector analysis – market size, product mix, changes to sectors, investment and output, key companies, key influences etc.• Procurement and key contractors – EU directives, recent contract awards, contractor profiles.

Key areas of insight include:

• Analysis of market performance in 2010-2014 – utilities output as part of the wider infrastructure market. Forecasts of market performance to 2019.

• Factors affecting the market and analysis of key market characteristics – (eg: energy legislation & European Directives, growing influence of the electricity sector, changes to regulatory framework in water sector, influence of 3G and 4G networks in telecoms sector, etc).• Performance of each key sub-sector – water, electricity, gas and telecoms, quarterly analysis of output and new orders, influencing factors, forecasts to 2019.• Procurement – European Purchasing Directives and the Utilities sector, contract thresholds, changes to purchasing procedures 2012-14.• Key contractors operating in the utilities sector – contractor profiles, recent contracts awarded, etc.

Some of the companies included:

AMEC Foster Wheeler, Arup Group, Balfour Beatty, BAM Nuttall, Barhale Construction, Bechtel UK, Black and Veatch, Carillion, Costain, EDF Energy, Galliford Try, GDF Suez, Interserve, Kier, Laing O’Rourke, Morgan Sindall, Morrison Utility Services, Skanska UK, SSE, Vinci Construction, UK Power Networks.

Key areas covered in the report include:

THE MARKET

• UK Construction Output – overview of UK construction market 2009-19, mix by sector 2014, key influencing factors, trends.• Infrastructure and Utilities Market – size in terms of GB construction output, sector mix 2014, key trends in infrastructure sectors.• Utilities Market – sector mix, output by sector, quarterly analysis by output and new orders, key influencing factors, future prospects.• Utilities output forecasts – assessment of potential performance 2014-19, key influencing factors, and output forecasts to 2019.SECTOR ANALYSIS – WATER, ELECTRICITY, GAS & TELECOMS

• Industry structure – by sector and by country for individual sectors, regulatory control, industry size, factors influencing structure of the industry, etc.

• Construction output by sector – 2009-14 with forecasts through to 2019, quarterly analysis of output and new orders. • Future investment by sector – current plans for capital investment and future investment, influence of legislative or regulatory controls.• Key trends in the market place – factors of influence; are the trends and factors of influence set to continue, or will there be changes?• Identification of key companies for each sector – profiles of key utilities companies involved in each UK sector – eg water companies, gas & electricity generation, transmission & distribution organisations, leading telecoms companies.• Current forecasts to 2019 – construction output by electricity, gas and total utilities in GB.PROCUREMENT AND LEADING CONTRACTORS

• Procurement of utilities works – European Procurement Directives, exemptions for utilities companies, current contract thresholds and those applicable to utilities sector.

• Recent contract awards in utilities sector – includes recent AMP 6 contract awards in water sector as well as some major electricity contracts recently awarded.• Structure of utilities contracting sector – analysis by employee numbers for water, electricity and communications sectors, recent corporate activities.• Leading contractors in utilities sectors – company profile, area of activity, recent utilities works, contracts awarded, major clients in utilities sector etc.REVIEW OF FUTURE PROSPECTS

• Trends over the medium-term and forecasts to 2019; key influencing factors within the market, potential influence of regulative and legislative changes.

• Recognition of need to secure UK’s future energy supplies – change to renewable generation as well as greater influence of nuclear power likely to boost electricity sector output.

The utilities sector comprises the water, energy and telecoms markets, which were previously operated as state run monopolies but have been opened to private competition for more than 25 years. Construction output for the utilities sector for Great Britain in 2014 was around £7.9bn and has experienced growth of 64% since 2008, outperforming the wider infrastructure market over the last 2-3 years due to outstanding growth in the electricity sector. Construction output in the electricity sector more than quadrupled 2008-14, and this accounts for the overall improvement in sector performance over the period.

The chart indicates that utilities construction output grew by 49% 2009-11 but only by 10% 2011-14 when growth in the electricity sector was partly offset by declines in the water and sewerage sectors. The level of capital spending within the utilities sector is underpinned particularly through 5 year asset management and renewals programmes for individual sub-sectors such as water and electricity.

Underpinning construction output growth for the electricity sector during the past three to four years has been the expansion of the renewables sector, in particular offshore wind. In addition, the decommissioning of outdated power stations (both fossil fuel and nuclear) and the construction of new generation capacity, as well as the programme of renewal and improvement to the transmission and distribution networks have all boosted construction output. The water sector benefits to a degree from the continued focus of the Regulator on improved customer service and water quality initiatives which have resulted in greater spending on improvements to mains and water treatment plants. The refurbishment of the gas distribution network and building of new gas storage facilities have assisted in boosting output growth in this sector in recent years. Telecoms revenues have remained steady over the period, despite increasingly competitive pricing for mobile contracts.

Current prospects for the utilities sector into the medium-term remain optimistic with output set to increase until 2019. Fundamental to this positive forecast remains the influence of Government policy commitments in a number of areas such as the Renewables Obligation, energy security and the rollout of superfast broadband. These policies are underpinned by the Government’s National Infrastructure Plan and the implementation of a number of measures to incentivise private investment. Another key influence is the influence of the regulatory environment in the water and energy sectors, which provides a framework for medium-term programmes of capital investment.

Construction Firms Sentenced After Culvert Collapse

Two building companies have been fined after a man was seriously injured when a structure that allows water to flow under roads collapsed on him.

Maidstone Crown Court heard that Kent County Council appointed Enterprise to replace an old, damaged, brick culvert under Tudely Lane Tonbridge. Enterprise in turn appointed Topbond to do the majority of the work.

A culvert is an embedded structure, usually surround by soil and can be made from steel, brick or reinforced concrete or other material and is used to transport water underground from one side of a road or railway to another.

The Health and Safety Executive (HSE) prosecuting told the court that on 27 January 2012 water was being pumped out of the work area when three workers including 63-year-old Michael Skitt of Kingsnorth, Ashford, entered the area between two culverts in order to clear a channel for the remaining water to flow toward the pump head.

They had begun to clear loose material, but had not started digging.

Shortly after they entered the area, the old brick culvert collapsed. One man jumped clear, another was hit but managed to release himself, but Michael Skitt was trapped and injured.

Mr Skitt suffered multiple injuries including shoulder blade breaks, an open shin break and a dislocated knee. Ongoing issues with his foot may see him need further operations. Mr Skitt spent 26 days in hospital and has now had to give up full time work and walks with a stick.

HSE said the stability of the structure was not assessed adequately, nor sufficient planning undertaken to ensure adequate control measures were in place.

Its investigation found that originally the old culvert was to be totally demolished early in the work, when this was changed the implications of uncovering half of the damaged culvert and therefore loading it unevenly and undermining it were not managed.

Although culvert repair/replacement is a relatively unusual construction job, the collapse of excavations and structures is common and the court heard the defendants in the case were made aware of the potential of collapse by the original designers/engineers several times.

The culvert could have been demolished early in the work, failing this, there are a number of commonly used ways to support structures during construction work.

Enterprise (AOL) Ltd of the Sherard Building, Edmund Halley Road, Oxford admitted breaches of section 22 (1) and 28 (1) of the Construction (Design & Management) Regulations 2007. They were fined a total of £90,000 and ordered to pay an additional £22,876 costs.

Construction firm Topbond PLC, of Oyster Quay, Castle Road, Sittingbourne, Kent admitted breaches of section 13 (1) and 28 (1) of the same regulations. They were also ordered to pay £22,876.60 costs and were fined £70,000.

After the case, HSE inspector Nicola Wellard said: “This is a sad case that has changed at least one man’s life for ever. The culvert was being replaced because it had been damaged previously.

“Just this one piece of information should have been enough to ensure both contractors assessed the stability of the culvert throughout the work and took appropriate measures to ensure people were protected from the risk of collapse. These risks are well known and the fact that the two other men escaped without serious injury was just pure luck, this could easily have been a multiple fatality.”