Construction output for utilities, as with other infrastructure sectors, was fairly robust in 2014 with 9% growth, representing a significant increase on the previous year. The market has been strengthened by ongoing asset renewal programmes and by the very strong performance in the electricity sector. Current prospects for the utilities sector remain optimistic with output set to increase to around £11.9bn by 2019.
Construction output in the utilities sector in Great Britain has experienced overall growth of 64% since 2008, and has outperformed the wider infrastructure market over the last 2-3 years. Positive influences on this sector include the government’s commitment to renewable energy and the country’s energy security. Renewables generation is likely continue to be a key driver for growth for electricity output in the medium term, particularly from offshore wind farms.
Water was the leading sub-sector up until 2011, but its share slipped back dramatically in 2014. The water sector benefits to a degree from the continued focus of the regulator on improved customer service and water quality initiatives which have resulted in greater spending on improvements to mains and water treatment plants, and the water and sewerage sectors are likely to see some degree of recovery through major projects such as the Thames Tideway Tunnel. However, the change in priorities set by the regulators appears likely to lead to greater emphasis on service delivery and on RMI, rather than on new work, so that any recovery in share is likely to be modest.
Construction output in the electricity sector more than quadrupled 2008-14, and has contributed strongly to the overall improvement in the utilities construction sector in recent years. Underpinning construction output growth for the electricity sector during the past three to four years has been the expansion of the renewables sector. In addition, the decommissioning of outdated power stations both fossil fuel and nuclear and the construction of new generation capacity, as well as the programme of renewal and improvement to the transmission and distribution networks have all boosted construction output.
The refurbishment of the gas distribution network and building of new gas storage facilities have assisted in boosting output growth in the gas sector in recent years. Medium-term prospects for the sector remain fairly positive with the likelihood of further onshore and offshore gas storage facilities to address the issue of the UK’s energy security and increasing dependence on gas imports as North Sea production declines.
The telecoms sector is the most open of the utilities sectors in the UK. Telecoms revenues have remained steady over the period, despite increasingly competitive pricing for mobile contracts. Revenue from mobile data, driven by increased smartphone use, and from fixed internet, driven by the rollout of superfast broadband, have offset the decline in revenue from fixed voice calls. Another key development is the increasing availability and uptake of superfast broadband. BT reached its target for the roll-out of superfast fibre optic broadband of the UK in 2014, a year earlier than originally planned.
“Current prospects for the utilities sector into the medium-term remain optimistic with output set to increase until 2019. Fundamental to this positive forecast remains the influence of Government policy commitments in a number of areas such as the Renewables Obligation, energy security and the rollout of superfast broadband” said Keith Taylor, Director of AMA Research. “Another key influence is the influence of the regulatory environment in the water and energy sectors, which provides an underlying motivation for medium-term programmes of capital investment.”
Growth in utilities construction will also be underpinned by the Government’s National Infrastructure Plan, which outlines a number of relevant policies, and the implementation of a number of measures to incentivise private investment in these sectors.
The ‘Utilities Construction Market Report – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.