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Boom times come to an end as foundations market levels out

THE UK foundations market has levelled out after several years' sustained growth, according to a report published this month.

UK Foundations Market Development, from Market & Business Development, indicates a slight fall in the value of work from £488.1M in 2002 to £486.9M in 2003. This follows the boom-time increase of 21% between 1999 and 2002.

Little growth is predicted until at least 2008 - about 1% in real terms - resulting in a rise to about £497.7M. Growth in the private housing and commercial sectors are expected to drive this increase.

Cementation Foundations Skanska's managing director Robin Wood commented: 'We haven't witnessed anything too sinister yet.

There is a sensible level of enquiry. While it's always nice to see a lot of work, it's good to see a steady increase rather than a feast followed by a famine.

'By late next year Highways Agency projects such as the Stonehenge tunnel will start to come through. Also, Crossrail and the Olympic bid are hand in hand and we're all waiting to see what happens there.'

Piling work accounted for the majority of the market during 1999-2003 with a steady 64% throughout, equating to £313.6M at the end of this period. Like the rest of the market, the sector suffered a slight drop from its 2002 high of £314.3M.

Small diameter bored piles maintained domination of the piling sector, steadily increasing their share from 43% in 1999 to 46% in 2003. The large diameter bored piles market share dropped slightly during the same period from 24% to 23%. However, due to the overall rise in the market, the value of this work rose by 13% to £72M in 2003.

Although the report indicates the market will flatten out over the next four years, there are some exceptions. For example, the ground improvement sector looks set to increase in value, hitting £105.3M by 2008.

The report also suggests that although consolidation will increase within the industry, it will remain highly fragmented. This is partly because the continuing intense competition on price encourages the use of subcontractors, who must offer highly competitive quotes which will not hinder the profitability of the larger companies.

Keller's sales and marketing director Martyn Singleton disagreed there would be consolidation. 'In a shrinking market you don't want to start buying up capacity and the major companies will start to entrench.There will be a reduction in [the number of larger firms] as they will be affected by the lack of big projects, but it won't affect the small players.'

The reports findings are in line with last year's study by Market & Business Development (GE March 2003) but contradict an MSI Marketing Research report last year that predicted five more years of significant growth for the foundations industry (GE September 2003).

It said output would rise by 11% to 18% between 2003 and 2007, although this prediction was based on the go-ahead of large infrastructure projects such as Crossrail.

lThe UK Foundations Market Development report is available from MBD, £550.Tel: 0161 247 8600; www. mbdltd. co. uk

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