The credit crunch has given way to a full blown recession which is being felt rather sharply in the geotechnical and geoenvironmental industry. Gemma Goldfingle surmises the profession’s views on performance over the past year and explores whether there is light at the end of the tunnel.
It’s been a tough year for the geotechnical industry. Last year’s speculation of the credit crunch and its effect on the booming construction industry has given way to the realities of a full blown recession. Redundancies, shelved projects and even company closures are taking place, which has led to a bleak picture in this year’s Geotechnical Services File survey results which are available to download now.
However, newly formed Balfour Beatty Ground Engineering has weathered the storm well by taking top place in the leaderboard through canny acquisitions and a £113M turnover. Elsewhere Jacobs Engineering has kept hold of the top spot of the top 20 employers table with 341 staff and Hydrock Group has stepped up to lead the top ranking consultants with a £44.2M turnover.
The contractor’s leaderboard has seen some changes with BBGE taking the top spot from Roger Bullivant while Tensar International has stepped up to be the manufacturer with the highest turnover at £13M. New to the file, Geothermal International is heading up the suppliers top five table with a turnover of £11.6M
But confidence levels for the next year are low with just over a quarter of respondents predicting any kind of growth this year. This is in stark contract to last year when, even with talks of impeding doom, 61% of companies anticipated a rise in workload. Most firms simply expected to maintain the status quo and mirror last year’s financial performance.
Unsurprisingly over 80% of this year’s respondents pinpointed the credit crunch as their number one concern. Aarsleff Piling managing director Terry Bolsher says that it is currently experiencing a 55% loss in activity and that the company is battling with very low tender pricing. This is a recurring point of concern for many respondents, with Bauer Technologies managing director Michael Jones concerned about “cut throat pricing requirement from clients” during these turbulent times.
The stagnant housing market has played a big part in the slump with many developers completely halting projects over the past year. New builds were down 42% from 2007-08 figures according to figures quoted by the Department of Communities and local government.
Perennial GSF list-topper Roger Bullivant, whose stronghold was in housing, is the most notable big player to be affected. The piling contractor which has topped the highest earners list for the past three years has plunged to third, dropping almost 15% from last year’s turnover and 170 staff in the process.
“Housebuilding came to a virtual standstill last year,” says Roger Bullivant director John Patch. “Add that to the diminished workload in the commercial and industrial sectors and it has spelled a difficult time for many in our industry.
“Despite some murmurs of activity from housebuilders it will be some time before workloads increase to pre-credit crunch levels.”
But rumours of green shoots persist. Housebuilder Taylor Woodrow recently announced that its order book had grown almost 75% since the start of this year and rival company Redrow has finally started to commission homes after almost a year of inactivity. The National Housebuilding Council which regulates new home building has also seen the first quarter-on-quarter rise in applications for new homes in almost two years pointing towards some form of stability.
Despite these reports confidence of recovery remains low in the geotechnical industry with only 17% of GSF 2009 respondents expecting growth in private housing work over the next year. Government promises of reinvigorating the social housing market has also failed to make an impact on confidence levels with only 24% of respondents expecting growth in this sector.
Many are pinning their hopes on the still buoyant civils market with 48% of respondents expecting yearly growth in rail and 38% in road infrastructure projects. Government funding will help major schemes like the £16bn Crossrail scheme, London Underground improvements and the £6bn programme of investment on the UK’s roads get of the ground. This will help bolster the industry during the crisis.
Power has emerged as the sector which most respondents expect to grow with 61% of those questioned identifying it as the next investment hotspot. The Government push towards creating a sustainable, secure energy resource has contributed to this optimism. Around 7000 new wind turbines are expected to be built according to government ministers.
“The need for alternative energy sources means there will be growth in nuclear power stations and wind farms. It is the only sector in which we expect to see rising workloads in the short term” says Ramboll director Mohsen Vaziri.
Continually increasing energy demands meshed with increasingly stringent carbon reduction targets means that the renewables sector is primed to flourish. Geothermal energy has taken off in the past year with a quarter of firms responding to the GSF claiming to be involved in it. With the Ground Source Heat Pump Association reporting 100% growth in the market year on year, the technology is fast becoming a viable option for clients eager to achieve energy efficiency credentials.
The Geotechnical Services File2009 profiles 270 geotechnical and geoenvironmental firms – nearly one half of which are consultants and over a third of which are contractors, with the remainder made up of manufacturers and suppliers. Geo staff numbers within these firms total 6665.
Despite the doom and gloom, the top 35 earning geotechnical firms brought in a £1.12bn, amazingly £1M more than last year’s highest earner figures. Contractors dominate the top ten with only two consultants – Arup and Mott MacDonald appearing in the list.
Newly formed Balfour Beatty Ground Engineering – which comprises of Stent, Pennine and Testal in this year’s entry (with newly aquired Branlow’s figures not appearing until the next financial year) lead the field with an annual turnover of £113M.
Contractors Bachy Solentanche appear to have bucked the downward trend in the industry with turnover figures up a staggering £28M from last year. “The bulk of our turnover has come from major projects such as the Tyne Tunnel and The Pinnacle which we had on our books before this financial year” says Bachy business development manager Paul Hodgson.
“We were lucky enough to have some long term major schemes in the pipeline to boost our figures. Unfortunately our forward workload isn’t looking as healthy in the short term. We, like many in the industry, are hopeful that more major infrastructure projects like the Lee Tunnel come through to take us through these tough times,” says Hodgson.
Major projects will play an important part in industry stability over the next few years. Even at this early stage some 28% of firms entered say they are already involved in Crossrail and 35% are working on the Olympics. Further major schemes such as the Thames Tideway tunnels and nuclear new build programme will keep the geotechnical industry buoyant.
Despite the downturn many of the companies taking part in this year’s GSF are still concerned with the skills shortage in the long-term. Worries are circulating that skilled geotechnical engineers made redundant during the recession are leaving the profession altogether. When the recovery comes, many believe that the industry will not have enough skilled workers to cope with it.
Jacobs once again remained top employer with 341 geo staff. Director at the consultant, Chris Adam shares the long-term skills concern. “Due to the recession there may be a temptation to close the [Home Office’s] National Shortage Occupation List which includes 23 ground engineering disciplines. This will restrict the ability to employ skilled overseas staff.”
With the domestic situation looking somewhat dire, a whopping 85% of geotechnical specialists have worked overseas in the past year to bolster fees. International projects will hold the key to survival for many, with half of those questioned identifying the Middle East as a growth region for the next year despite rumours of the downturn depleting construction activity in Dubai.
The Geotechnical Services File2009 remains the most comprehensive listing for the UK geotechnical and geoenvironmental industry. An invaluable guide to identifying key trends and clear comparisons for company.