Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

Feeling down

Latest figures put the value of new orders for infrastructure works in the second quarter 1998 at around £1.1bn. This level is about 7% up on the previous quarter, but similar to the corresponding figure for the same period last year.

If the trend continues, workload for the current year should exceed expectations. But overall the infrastructure sector is only holding its own and there are concerns about a possible downturn with the attitude to the future only slightly bullish.

The water sector now at the mid point of its current five year plan continues to be a major source of new work contributing nearly 50% of the total value of new orders in the second quarter.

Elsewhere the recently announced refinancing and re-phasing of the Channel Tunnel Rail Link will effectively spread construction over eight years in lieu of the original five and a half. However, while this will slow infrastructure expenditure, the projected spending by Railtrack of £1.45bn in 1998-99 is up 16% on the 1997-98 figure. Its investment plan of £17bn over the next 10 years includes the West Coast Main Line upgrade which is expected to cost £2.1bn.

Notwithstanding the higher rail spend, infrastructure is expected to suffer from cuts in roads spending following the slashing of new schemes in the Government roads review. As a result, infrastructure spending is expected to fall by 2% this year with no change in 1999 and an increase, of 5%, in 2000.

Currently construction material sales are 5% up on last year with brick sales the highest in March and April since 1990. Prices of most construction materials have risen by between 2% and 5% in the last 12 months. The only exception is timber and reinforcement whose prices have fallen by as much as 11%.

Apart from material prices, other future price increases will include a rise in landfill tax to £10/t from £7/t for active waste from April next year with the rate for inactive waste remaining at £2/t. Effects on aggregate prices of a much debated environmental tax on aggregates are unlikely to be felt until after 2000.

Skill shortages have increased labour costs for bricklayers and carpenters by 15% nationally over the last 12 months with increases in the South of over 20%. Continued concerns over skill shortages now extend into management with shortages of middle and senior construction managers being reported along with higher costs, again in London and the South East.

EC Harris considers that the establishment of partnering agreements has created a shortage of good managers. Firms presented with staffing proposals for conventional work have found that availability is affected by key staff already signed up to partnering arrangements.

Tender price rises have been driven by labour rate increases, although until recently, the increase in workload has allowed contractors a 'comfort zone' on margins. Nevertheless, there is little complacency among those whose margins remain tight.

The expectation is that the current level of tender price inflation will continue over the second half of this year but that price rises are likely to tail off thereafter. The forecast is that tender prices will increase by 5% nationally over the year to the third quarter of 1999, with a similar rise over the following year.

For further information contact Terry Povall at EC Harris, tel: 0161 832 2232.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Please note comments made online may also be published in the print edition of New Civil Engineer. Links may be included in your comments but HTML is not permitted.