Changing structure of the UK Highway Maintenance market

The Highway Maintenance market in the UK is both substantial and complex, and is a major part of UK infrastructure spending - though Government cutbacks have impacted on some sectors of the market.

However, the Government is showing signs of recognising the need to invest more in road building and other transport projects, and the poor winters over the last 2 years have generated some extra funding for mending potholes, the latter being a contentious issue at a local political level.

There is a complex structure of responsibility for maintenance of highways. Motorways and major trunk roads are managed by Highways England, while the remainder of the road network is managed by various classes of local authorities, who either undertake the work with direct works teams, or award contracts to contractors to undertake the work on their behalf. As the chart shows, the market is split between direct labour organisations which are part of the council, and long term contracts awarded to external organisations specialising in term maintenance contracts.

There has been some rationalisation of local government authorities in the last 40 years and the practice of local authorities awarding long term maintenance contracts has steadily increased since the 1970s. Early contracts were of a short duration and it was difficult to organise and generate a reasonable level of consistency and profitability, so contract periods have lengthened allowing the contractor a chance to invest in plant and equipment necessary for the contract, and as a result current contracts run from 3-5 years up to 25 year PFI contracts.

There has been a growth in contractor involvement in this market and companies such as Lafarge Tarmac, Amey, Ringway, Balfour Beatty, Kier etc. have taken many of these contracts in the last 20 years. As a result, as of mid-2015, some 50% of all authorities have now created long term contracts for maintaining highways in their areas, though the split varies significantly between types of authorities and regions of the country.

“Contractors with a more general construction background have been very active in recent years as they have recognised good opportunities in the highway maintenance sector” Said Andrew Hartley, Director of AMA Research. “Examples of construction companies that now have a considerable involvement in highway maintenance and the wider infrastructure market include Kier, which has acquired May Gurney and Mouchel, and Amey. We anticipate that other ‘traditional’ construction companies will enter this market in the next few years through acquisitions and partnerships.”

The government is keen to explore more opportunities to bring private finance and expertise into the road network. The national network is complete although there are plans to improve sections of motorways which are most heavily trafficked, but there is a need to improve the regional network by improving roads which link national network motorways and also improving local A roads. The government is examining the possibility of letting contracts in these areas which will embrace maintenance of existing roads and undertaking improvements, many of which are mentioned in the recently published DTP Road Investment Strategy. The combination of term maintenance contracts and new forms of regional contracts, and the anticipated increase in funding, should offer significant opportunities for the private sector.

The report also reviews some of the key product sectors, such as road surfacing materials (asphalt, macadams, aggregates etc),reinstatement products, street lighting etc., which are key components of the highways maintenance market

The ‘Highway Maintenance 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.