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Contractors look to energy sector to secure workload

Six out of 10 civil engineering contractors are looking to the energy sector to provide their future incomes as road spending dries up, NCE can reveal.

In a survey carried out for the NCE Contractors File 2010 to be published next month, 60% of firms identified energy as one of the key sectors they expected
to provide growth over the next two years.

The survey covered 130 UK civil engineering contractors.

In stark contrast just 17% of firms said the roads sector would provide growth. This was despite the fact that the roads sector generated £4.5bn of orders in 2009.

The Department for Transport is considering making cuts of up to 40%.

As a result contractors’ confidence in the sector has plunged in just 12 months. Last year, 28% of firms were forecasting growth in this sector.

Conversely, the expectation that the energy sector will deliver more work for contractors has been growing steadily for several years.

Thirty six per cent forecast growth in this sector in 2008. This increased to 44% in 2009, and to 60% this year. The energy market is worth £1.2bn a year to civil engineering contractors.

“In the last three years, 822 personnel have been switched into new and emerging markets.”

Stephen Wells, Costain

Costain has switched more than 800 staff to emerging markets such as energy and waste over the last three years.

“We are particularly proud of securing yet another record forward order book of £2.6bn - up by 30% on last year,” said Costain group strategy and business director Stephen Wells.

“In the last three years, 822 personnel […] have been switched into new and emerging markets.”

Morgan Sindall said it too was focused on the energy and water sectors alongside transport.

VolkerWessels, now one of Britain’s top 10 civil engineering contractors following the integration of all its subsidiaries, is also looking to move from transport
to the energy sector.

Meanwhile, research by NCE sister magazine Ground Engineering shows that geotechnical firms are also refocusing their efforts on energy after the geotechnical market shrank by a quarter last year.

Confidence is slowly returning, to the geotechncal sector despite concern about the effects of public spending cuts.

Only 11% of companies in this sector expect their workload to decrease this year and only 5% predict redundancies, according to Ground Engineering’s 2010 Geotechnical Services File (GSF), published this month.

This confidence stems from growth in the power sector, with 52% of respondents predicting that the government’s new nuclear and wind farm development programmes will bring growth next year.

Fugro Seacore managing director Robert Jenkins said this commitment to the energy sector would translate into increased geotechnical workload.

“There will be an increase in demand for geotechnical site investigation, consultancy and monopile installations,” he said. Arup director Tim Chapman added: “The energy generating gap is huge so we need to start building - and quick.”

Overall, the combined civil engineering turnover of the firms listed in this year’s NCE Contractors File is down £3bn from £16.4bn in 2008 to £13.5bn.Combined forward orders are £22.5bn, down £2.2bn on the £24.7bn reported last year, but up £2.5bn on the £20bn reported in 2008.

Expectations about margins are also grim - less than a third of contractors expect anything more than 6%. Four out of 10 hope for a respectable 3% to 6%, but three out of 10 expect less than 3%.

Geotechnical workload in the UK has plunged dramatically over the last 12 months, according to the GSF.

The top 35 geotechnical firms reported a combined turnover of £867M - down 25% on last year’s figures.

In the Contractors File, expectations about staff numbers are also restrained - four firms admitted they might have to shed staff.

The GSF reveals that 41% of firms had to make redundancies in the last financial year.

  • The Civil Engineering Contractors File 2010 will be published with the 5/12 August issue of NCE.

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