We asked 32 civil engineering consultants and contractors - big and small - for their expectations of the infrastructure market in 2012. It’s fair to say they were surprisingly confident.
Surveyed one year on from the dark days of the Comprehensive Spending Review - and ahead of the morale boosting Autumn Statement, the firms were surprisingly chipper.
Their view on the state of the market compared to this time last year was certainly surprising. On the big question - staff - it is definitely good news. Of the firms surveyed, 27% say staff numbers are up, 35% say they are down and 38% report no change.
Energy is the sector that fared best, with 23% of firms reporting an increase in workload here.
Looking forward, there is a degree of optimism with 40% of firms saying they expect to be recruiting in the next three months. Just 3% say they are expecting to be making redundancies. Overall workload is, surprisingly, up for 39% of firms, about the same for 43% and down for just 18%.
Cut in margins
But increased work came at a price, with 40% of firms reporting a cut in margins on public sector work and 32%reporting a cut on private sector work. Just one firm surveyed said it was brave enough to actually increase its margins in the public sector; two did the same in the private sector. This drop in margin follows through to the root cause - a significant cut in tender prices/fees charged. Thirty five percent of firms have cut prices on new construction projects, with just 12% brave enough to up them.
By sector, the highways industry has - unsurprisingly - been hardest hit. Just 7% of firms have seen workload increase in the trunk road market, and none at all report increases in local authority roads work. Worse, 22% and 32% of firms saw workloads in trunk roads and local authority roads fall respectively. Last month’s Autumn Statement will be extremely welcome news for this, most beleaguered of sectors.
“Looking forward, order books are not faring too badly”
Energy is the sector that fared best, with 23% of firms surveyed saying they had seen an increase in workload here. Bulidings were not far behind, with 22% seeing an upsurge in work in the sector hit first by the recession.
Looking forward, order books are not faring too badly: overall 42% of firms say order books are up on last year, with 25% reporting a drop. Again, highways has taken the biggest hammering, with just 3% of firms claiming increased orders in trunk roads and none claiming an increase in orders for local authority roads.
Order books are up most in energy, with 25% of firms claiming an increase, and building - with 24% seeing an increase. Rail and water - regulated sectors midway through five year spending cycles are steady - with similar numbers of firms reporting increased and decreased order books. But the vast majority - 73% and 88% respectively - reported no change.
“In new nuclear, confidence post-Fukushima has really fallen”
So what is driving the cautious optimism? Certainly not the changes to the planning regime that are rolling through government. Replacing the Infrastructure Planning Commission with the Major Infrastructure Planning Unit does little to swell confidence, with only 19% of firms saying it will speed up the planning process. Last year, 26% said it would - a worrying drop in confidence.
Nor is it confidence about delivery of some of the major projects and programmes last month identified by the Treasury and Cabinet Office as “priority projects”.
In new nuclear, confidence post-Fukushima has really fallen. The belief that Britain will have a new nuclear power station up and running by 2018 - the date originally mooted by EdF for Hinkley Point, but which it is now not committing itself to - is now held by just 19% of firms. Last year 44% of firms believed the date will be hit.
“Crossrail confidence has also waned - with just 47% (less than half) of firms expecting the central section to be delivered on time”
Confidence in the renewable sector isn’t great either. Now just 19% of firms expect the mega-Round 3 offshore win programme to be completed on time by 2020 - last year 30% thought it would.
And hopes for the Severn Barrage have also completely evaporated, with not one firm believing it will ever be built now that government has refused any funding.
Confidence in high speed rail has also waned, with just 13% of firms now expecting to see construction of High Speed 2 start by the supposed start-date of 2015. Last year 16% did. Crossrail confidence has also waned - with just 47% (less than half) of firms expecting the central section to be delivered on time by 2018. Last year it was a glass half full 56%.
Confidence in on-budget delivery has also dipped slightly with 72% expecting the £14.4bn budget to be exceeded - an increase on 70% last year. Confidence in Thames Water’s Thames Tunnel has also collapsed. Last year 53% of respondents thought that construction would begin in 2017. Now it’s just 34%.
Finally, despite surviving the Comprehensive Spending Review largely unscathed, confidence in Transport for London has also dipped alarmingly. Now just 9% of firms believe the Northern and Piccadilly Line upgrades will be completed by 2018. Last year 23% did.
Infrastructure 2012: Some cause for optimism