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What is the biggest challenge to the construction equipment industry?

When the balloon went up and the markets went down in 2008, there were real worries as to whether and how the construction equipment market would cope with the fallout from the global financial meltdown.

Five years plus on we have seen much cost cutting and re-engineering of supplier companies but we have not seen the wholesale outbreak of mergers, acquisitions and bankruptcies that were predicted – certainly by me.  Most of the headline brands of construction equipment and their component and accessory suppliers are still in business, having negotiated the rocks and boulders in their path. Along the way they have learnt a lot about survival techniques that would make Ray Mears proud. So, with the UK economy now the best performing in the G10, are prospects unequivocally on the up for those manufacturing and supplying in the construction equipment market? No, there are always challenges to the supply chain from raw materials, to manufacture, to distribution and machine operation. Here are some to watch out for.

Google has pioneered the self-driving car. With advances in telematics, the fully automated earthmover could be the next disruptive technology to hit the market place. Just as the agricultural sector has its precision-farming model where IT competence has replaced the ability to manhandle straw bales, traditionally trained digger operators could be marginalised. It is arguable too that there would have been more market innovation already if OEM’s budgets had not been tied up in meeting the increasingly expensive requirements of European directives.

Industry estimates suggest that some 75% of research and development budgets have been diverted to regulatory compliance, with improvements that might more directly benefit the customer taking the minority share of investment. Investment plans for retail space are on their way down as cybershopping takes hold. Showrooming, the act of checking out goods in store but buying on line at the best price is affecting the economics of many suppliers of consumer goods. Could the power of the internet also compromise the established distribution channels for new construction equipment? Online auctions are already popular for used machines and will surely grow.

But probably the biggest challenge to the well-being of the UK construction equipment market is the British aversion to big construction projects. The Channel Tunnel slipped under the radar a generation ago and the lure of hosting the Olympics was too great to resist. But the “not in my backyard” hullaballoo surrounding High Speed 2 and the lack of runway space in the South East show no signs of abating – and that means more enquiries, more delays and continued inadequacies in our physical infrastructure. 

Rob Oliver is the chief executive of Construction Equipment Association

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