Transport set to dominate output within the UK infrastructure sub-sector into the next decade

In 2017, contractors’ output in the transport sector was valued at around £8.6bn. Major transport infrastructure development programmes are largely driven by public sector funding under 5-year investment programmes, with funding allocated on an annual basis. Between 2012 and 2016, contractors’ output in the transport infrastructure sector had been volatile, due to annual fluctuations in new road construction output and year-on-year decreases in rail construction activity levels.

Roads construction and maintenance is mainly being driven by the first phase of the Highways Agency’s 5-year Roads Investment Strategy (RIS1), which is part of the National Infrastructure Plan (NIP). Under this, over £15bn of funding has been allocated for capital enhancement and renewals for the period 2015-16 to 2020-21. Other major road schemes are being delivered as part of the multi-modal Transport Strategy for the North, which sets out the strategic options for future transport investment in the north of England to boost the Government’s concept of a “Northern Powerhouse”.

As a result of these and other ongoing schemes, roads construction output is forecast to increase in 2018 and 2019 as road improvement contracts under Highways England’s Collaborative Delivery Framework (CDF) translate into increased output. In addition to new works and major upgrade programmes, Highways England also has a maintenance budget of £1.3bn over its first fixed 5-year investment period for to 2019-20.

In the rail sector, there have been significant increases in contractors output and new orders, underpinned by a combination of major projects and regional frameworks. Contractors working in the UK rail sector currently have £38bn funds available for Network Rail for Control Period 5, covering the period between 2014 and 2019.

Rail construction output is expected to grow significantly during the period 2017-2019, underpinned by a substantial number of major schemes. These include the Bank Station redevelopment project, main tunnelling works on the Northern Line extension to Battersea and electrification of certain cross-country routes, the delayed Metropolitan Line extension project and enabling works on Phase 1 of the HS2 Project.

In the airports sector, proposed additional runway capacity at Heathrow should underpin future development, though major construction works are not likely to begin until 2021. Output in the airports sector is also expected to be boosted by a 4-year development programme at Manchester Airport and a £1.2bn capital investment programme over the next 5 years at Gatwick Airport.

Furthermore, announcements of additional capacity and investment at the UK’s major airports, together with a number of smaller and medium sized projects at both major and regional airports should also generate additional work in the sector over the next few years.

In the UK ports sector, a number of major schemes are currently being planned or are progressing, many of which are part of key major regeneration schemes including: a significant expansion at the Port of Tilbury; the Western Docks Revival (DWDR) project at the Port of Dover; the second phase of Peel Ports Group Liverpool2 terminal expansion programme; and a major expansion of Southampton Docks.

In Scotland, Wales and Northern Ireland each devolved administration produces its own infrastructure plan setting out spending on economic infrastructure. The Scottish investment pipeline includes 30 major programmes and over 100 individual projects. In Wales, around £2bn is being invested in transport infrastructure projects, while in Northern Ireland, £2.6bn is being invested, with the majority being spent on roads.

The outlook for transport infrastructure construction is positive, with the Government recently committing to providing the biggest investment in transport infrastructure in years, and as a result. Forecasts indicate increasing output and a significant pipeline of major projects under the National Infrastructure and Government Construction Pipeline (NIP). As part of the NIP, around £92bn is to be invested in transport infrastructure over the period to 2020-21, of which more than half will be put into railways projects. A further £40bn will be invested across the infrastructure sector at large after 2021.

The ‘TransportInfrastructure Construction and RMI Market Report - UK 2017-2021 Analysis’ report 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.

UK Highway Maintenance market worth more than £10bn in 2017

The UK highways maintenance market is valued at more than £10bn, and makes up a major part of UK infrastructure spending. Expenditure by Highways England accounts for around a third of the market, while expenditure by Local Authorities in England on highways and transport in 2016/17 was approximately £4.4 billion. Structural maintenance accounts for a significant proportion of capital expenditure on roads by local authorities.

The Government has committed to major spending and investment programmes in the road network, driven by factors such as increased road congestion, rising population levels and deterioration of roads by adverse winter weather. Subsequently, the roads sector has been one of the market’s fastest growing in terms of expenditure in recent years. Major target areas include manufacture and application of bitumen macadam, and asphalt and bitumen emulsion, manufacture and application of surface dressing, aggregates for macadam and surface dressing, special surface solutions, road markings, reinstatement products, road studs and winter maintenance treatments.

Funding for Highways England is determined every five years via a Road Investment Strategy (RIS) set down by the Department for Transport. Through RIS 1, it aims to invest around £15bn in England’s road network over the 2015-2020 period, covering over 100 major schemes. In addition, the Pothole Action Fund is worth around £250m at present.

Within the last financial year, the Scottish Government budgeted more than £820m for expenditure on the country’s motorways and trunk roads, an increase of more than 18% compared to the previous year, while the Welsh Government’s 2016/2017 budget spent almost £52m on motorway and trunk road operations, with an additional £108.7m allocated for improvement and maintenance activities.

Private sector involvement in highways maintenance has steadily increased with around 50% of UK authorities now thought to use term maintenance contracts, many of which are 5-10 years in length, with some even longer. There has been an increase in major contractor involvement in this market with companies such as Kier, Amey, Tarmac, LafargeHolcim and Balfour Beatty taking many of the largest highways maintenance contracts. There have also been several mergers and acquisitions in the sector, and it is anticipated that other traditional construction companies will enter this market in future.

Going forward, investment in road construction and maintenance is projected to increase over the short to medium term, unless the UK economy suffers a major contraction. The Government also continues to explore ways of bringing more private capital into road building.

There are likely to be changes in the way certain highways are maintained. The next decade or so is likely to witness greater impact of technological advancements and ‘smart’ systems, as well as more consideration given to the environmental impact of highways maintenance projects. Changes in the way maintenance contracts are introduced are also expected.

“Environmental and sustainability considerations are likely to play a greater role in future highways management and some of the products which now feature in road and highways maintenance have been created with these criteria in mind” said Hayley Thornley, Research Manager at AMA Research. “Examples include photovoltaic road surfacing and solar-powered road studs, greater use of natural and recycled materials and/or aggregates and micro-foamed asphalt which lowers carbon dioxide emissions.”

The UK road network of the future is likely to include more smart motorways, and currently 10 smart motorways are planned for construction. Demand is also likely to continue rising for products which can help to reduce the time spent on site and therefore minimise disruption to road users.

The ‘HighwayMaintenance Market Report – UK 2017-2021 Analysis’ report 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.

Commercial Office Construction Market - 5 Key Facts

• Output has been buoyant, rising to reach £11.9bn in 2016. 
• Office construction represents 18% of total non-residential construction output.
• The private sector accounted for almost 94% of output in 2016.
• AMA estimates that pre-fabricated volumetric buildings for the commercial office sector is estimated at around £35-40m, or around 4-5% of the total prefabricated buildings market.
• The Central London tall buildings pipeline continues to grow, with over 437 tall buildings in the development pipeline.   

These facts have been extracted from AMA Research's 'Commercial Office Construction Market Report - UK 2017-2021 Analysis' available for purchase now. 

UK bathroom market to grow by 12% over the next four years

The UK market for bathroom products achieved value growth of around 3% in 2017. The pace of growth has lessened over the last 12 months compared to the previous 2-3 years, with modest growth expected in 2018 and 2019. The main factors influencing the market include lower levels of consumer and business confidence, in turn impacting on demand for bathroom products. Overall market growth between 2017 and 2021 is forecast at around 12%.

Baths and sanitaryware is the largest sector of the bathroom products market, followed by bathroom accessories, taps and mixers, bathroom furniture and whirlpool/spa systems. In terms of trends, demand for quality bathroom products with additional features is expected to remain significant, and will be supported by a greater level of replacement purchases as consumers upgrade to higher value solutions, with aesthetics continuing to exert a notable influence on consumer choice.

The growing consumer preference for minimalist, wall-hung and counter top designs will impact volume demand for sanitaryware. This trend will support the growth of prefabricated solutions, installation frames and concealed plastic cisterns. Taps and mixers will increasingly be used as a means of differentiation in domestic and certain commercial environments, with higher quality finishes and contemporary styling.

Popular products include space saving solutions such as wall-hung sanitaryware, slim-line wash basins and short-projection furniture. While in the baths sector, compact shower baths, small freestanding baths and space-saving ‘back-to-wall’ D shaped/skirted baths, continue to gain share.

In the bathroom furniture sector there is increasing demand for clever ‘invisible’ storage solutions that ensure that the bathroom remains tidy and clutter free. The market for bathroom accessories is likely to remain positive as consumers buy accessories as an easy and cost-effective way to update and personalise their bathroom.

Going forward, new housebuilding volumes are set to stabilise despite the economic uncertainty. Prospects remain positive in this sector and will support demand for bathroom products installed in new build homes, while RMI activity is expected to be more constrained in the next 2-3 years. Commercial private work will also remain a key driver of activity across a number of applications, including hotels and leisure.

 “The wide variation in UK bathroom size will continue to provide opportunities for product development to suit the various types of bathrooms such as ensuite, cloakroom installations etc.” said Hayley Thornley, Research Manager at AMA Research.

 “Modern, digital and advanced technology, such as digital taps and sensors to control temperature and flow, motion sensor LED mirrors and Bluetooth entertainment systems, will become more widely used in the bathroom as consumers and businesses become increasingly aware of their benefits. Consumers are demanding quality products that will last and use the internet to search for the best deals available.”

There will also continue to be a significant demand for inclusive bathroom products that are both practical and easy to use, such as low-level or walk-in baths for easy access, wall-hung sanitaryware for easier manoeuvrability, thermostatic and lever operated tapware controls, and shower toilets. This will be boosted by the Disabled Facility Grant (DFG) provision to pay for improvements such as accessible showering facilities, which is set to double over the next 2-3 years to over £500 million in 2019/20.

The ‘Bathroom MarketReport – UK 2017-2021 Analysis’ report 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.

Output expected to decline in the UK Education Construction sector

Construction output in the education sector has seen 4 years of consistent growth, and reached a peak in 2016 at around £11.2bn, driven by investment in both the school and higher education estate. From 2017 however, forecasts indicate that output will decline slightly over the next 3 years before returning to growth in 2020 and 2021. In the schools and colleges sector, demand continues to be strong and the pupil population is expanding rapidly. The need for additional school places is expected to exceed 420,000 by 2021.

While capital budgets remain constrained, the need for investment is recognised by the current Government, which announced £23bn of capital investment in the 2015 Spending Review to cover the opening of 500 Free Schools, and provision of over 600,000 additional school places. In the 2017 Spring Budget, it also pledged an additional £320m to help fund up to 140 new free schools as part of plans to increase investment in local infrastructure and relieve pressure on local authorities for increased school places.

Building programmes in England’s education sector are being led by the Priority School Building Programme (PSBP), the first phase of which is currently underway and will help rebuild 260 schools. For the second phase, the Government has allocated a further £2bn.

In Scotland, the Schools for the Future Programme, worth £1.8bn, is expected to deliver around 112 schools up to 2019, while in Wales, the main investment programme for the education sector is the 21st Century Schools Building Programme, which aims to upgrade and extend the entire stock of schools in Wales.

University construction work remains a much smaller market than the schools & colleges sector. Total construction output in the HE sector, including both private and public work, is forecast to rise to around £4bn by 2021, as UK universities continue to increase investment in new buildings. Refurbishment work is a strong sector for universities due to a backlog of repairs and upgrades to often large and ageing estates and also due to the pressures on institutions to cut the operating cost of their buildings.

Rising student numbers have placed additional strain on university infrastructure in recent years, including teaching and residential accommodation. However, in the most recent academic year, student numbers declined driven by the uncertainty for EU students surrounding Brexit and higher tuition fees. Going forward, the impact of potential immigration targets on EU student numbers coming to the UK and fee levels remain key issues of concern.

In terms of funding, English universities have seen a 4% decline overall between 2016-17 and 2017-18, with capital funding having declined by over 25% over the period. The environment for university funding has changed dramatically, and as a result, universities are turning to capital markets to fund infrastructure investments.

Education capital spending is set to fluctuate until 2021, having declined by around 12% between 2016-17 and 2017-18, before rising to £6.1bn in 2018-19, then falling again in 2019-20. Restricted budgets and limitations placed on the size of classrooms and overall space in new schools is expected to constrain value growth for construction output into the medium-term. Rising cost pressures for contractors have also delayed the timing for the second phase of the PSBP.

Going forward, higher education sector workloads are expected to be boosted by key long-term capital building programmes as universities seek to invest in research, to address past under-investment and provide additional space for teaching, research and accommodation facilities and to attract higher fee-paying overseas students. 

The ‘EducationConstruction Market Report – UK 2017-2021 Analysis’ report 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.

Tough times for support services industry as Carillion collapses

 Carillion's failure is significant within both the construction and the facilities management (FM) industries and will have implications for clients, competitors and suppliers across the spectrum of the construction industry.

The company employed approximately 43,000 people, and had grown via the acquisition of companies such as Mowlem, Alfred McAlpine and John Laing Integrated Services. The company was made up of the following business segments: Support Services, which includes facilities management; PPP Projects, which covers sectors such as healthcare, defence, education and transport; Construction Services excluding the Middle East; and Middle East Construction Services.

The facilities management environment in particular has been a key sector for Carillion as they supplied FM services to more than 150,000 properties across the UK, whilst the Support Services division operated in sectors such as defence, local government, corporate, healthcare and home affairs/justice, providing both hard and soft FM services. Elsewhere, the company jointly owned the CarillionAmey joint venture, which provided maintenance and housing services for personnel from the armed forces and their families.

Some challenges that have faced the FM industry in recent years have included:

• The Brexit effect - the current uncertainty caused by the Brexit vote has hampered economic growth, and one effect within the outsourcing industry has been a slowdown in the overall contract pipeline, with companies less willing to invest until the economic and political situation becomes clearer. There is also a worry that the industry will see labour shortages if immigration is restricted.

• Budget cuts - in the public sector, the market is strongly influenced by the Government's attempts to rein in spending levels, to reduce the public sector deficit. Budget cuts continue to impact upon many government departments, including leading FM end-user sectors such as healthcare and education. Across both central and local Government, budgetary constraints mean that the current emphasis is upon public sector organisations 'living within their means.' Many public sector organisations are therefore more reluctant to commit to long term outsourcing contracts, with the result that shorter contracts (e.g. three years or less) are becoming more common and renegotiation of longer term contracts is also evident.

• Declining contract values - the need to minimise operational costs has seen many organisations reducing both office space and their workforces, therefore having a negative influence on the FM market, as contract values are cut.

• Higher labour costs - the introduction of the National Living Wage in such a labour-intensive market (FM and support services), has led to increased pressure on contract prices and on some existing contract margins where the costs could not be recovered.

• Price competition - increasing competition between suppliers in the market has constrained both market values and growth and had an adverse effect upon margins, and in some instances led FM suppliers to underbid and over-commit to delivery in order to secure contracts successfully.

The growth of FM provision has created some major companies that are, to some extent, victims of their own success. They are managing very large numbers of contracts across many countries, something which can lead to operational and management problems. These developments have led to some companies adopting more stringent procedures for monitoring contracts, to ensure performance levels are adhered to and costs kept down.

Within the last couple of financial years, turnover for many of the leading FM operators has decreased, something which can mainly be attributed to the factors mentioned previously, i.e. the uncertain state of the economy, the continued rationalisation of the government estate and the market's maturity. The market appears to be approaching something of a crossroads, with FM services now also incorporating data management in greater quantities - companies able to embrace these new concepts and technologies will be the most likely to prosper.

There is little doubt the UK FM market is facing difficult times, not just in terms of profitability, but also the fall-out in terms of sentiment from the Carillion failure and whether this leads to a change of direction in many public and private sectors, with regards to the attraction of outsourcing.

For a more detailed review of the facilities management and outsourced services markets, visit this link, which provides details of market reviews relevant to this industry.

Sports construction forecast to increase by almost 10% in 2018

The sports facilities construction market in the UK was worth an estimated £1.5 billion in 2017 having grown substantially in the past year, according to a new report by AMA Research. Between 2011 and 2015, output across the sports sector fell year on year, with the exception of a slight increase due to the Olympics Legacy construction activity, but in 2016 and 2017 the sector returned to growth, underpinned by increased levels of activity in the professional sports sector. In 2018, output is expected to increase significantly.

Over the 2014-2016 period, the professional sports sector accounted for around a third of total contractors output in overall sports construction, and is estimated to have improved in 2016 and 2017, driven by renewed growth in stadium construction output, mainly for a few Premier League and EFL Championship clubs.

The education segment typically accounts for around 30% of total contractors output. This is partly because the UK’s education sports estate is extremely large with schools accounting for a substantial proportion of the total numbers of swimming pools, sports halls and pitches UK-wide. There were marked increases in output in the schools sector in 2015 and 2016, where there has been an overall increase in average project values although the number of projects has remained relatively static.

Leisure and sports centre construction also accounts for around third of output, despite growth having been constrained slightly by cuts to local authority budgets. In 2016 and 2017 there appears to have been some improvement compared to previous years. Over the medium term, construction output in the sports sector is likely to decrease due to ongoing pressures on local authority budgets and the ‘Brexit’ factor.

For 2018, we expect total contractors output to increase by around 9.5%, the main reason for this being the first year of the £800m re-development of Tottenham Hotspur’s White Hart Lane stadium. Beyond 2018 it is very difficult to forecast annual output levels reflecting the fact that several recent major proposals have been overturned. However, there should be a substantial increase in output over the period 2019-2020 should re-development of Chelsea FCs and Everton stadiums start next year, which seems likely.

“While the White Hart Lane, Stamford Bridge and Everton developments are ‘flagship’ schemes, there are also a significant number of other reasonably high-value football stadium projects that should sustain growth over the medium term” said Keith Taylor, Director of AMA Research.

“However, flat or declining levels of output in the leisure centre, semi-professional & recreational sports clubs sectors will have some constraint on overall growth rates, and we also expect growth to be modest for educational sports facilities, as schools upgrade following conversion to academy status.”

The ‘Constructionin the Sports Sector Report – UK 2017-2021 Analysis’ report 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.

Smart Technology an important growth driver in the UK Shower Market

In 2017, the value of the shower equipment market is estimated to have seen a moderate increase of around 2%, according to a new report by AMA Research. This follows a similarly modest increase of 3% in 2016. The level of penetration for showers has climbed significantly since the late 1990’s to reach around 90% in 2016, with at least one shower installation in the majority of UK households. Continued steady growth of around 2-4% per year is currently forecast to 2021.

Following two years of good growth due to increasing levels of new house building boosting demand and relatively buoyant consumer confidence supporting RMI activity, the shower equipment market was more subdued in 2016 and 2017, with 5% growth achieved over the two years. Uncertainty surrounding the Brexit process has impacted on business and consumer confidence, which in turn could impact negatively on new construction starts and RMI activity in the next 2-3 years in some end-use sectors.

Shower controls account for the greatest proportion of the shower equipment market with 46% share by value in 2016. Enclosures, screens and trays account for somewhat less than the shower controls sector, while the maturing shower market and higher level of shower usage, has led to some share growth in replacement products, such as shower accessories.

In recent years, product development and improvement in the shower equipment market has focused on quality and design with a trend towards higher value products and contemporary styles. Demand for digital showers have also shown good growth as the use of ‘smart’ technology in UK homes becomes more prevalent, with plumbing installers also increasingly familiar with digital showers and the installation benefits they can offer.

As the shower market matures there are greater levels of replacement purchases leading to product upgrade and added value opportunities. An increasing number of shower products are now designed specifically for retrofit purposes, such as electric showers with multiple cable/water entry points and mixer showers with standard pipe centres.

Demand for ‘inclusive’ showering solutions is growing, as increasing numbers of elderly and disabled people are now living at home, creating demand for accessible solutions that make the bathroom easier to use and more functional. For example, walk-in enclosures or wetroom areas, level access trays, thermostatic shower controls with easy-to-use controls, shower seats, grab rails etc.    

With environmental issues increasingly in focus, water saving is also becoming an important consideration. With over one third of UK homes on a water meter, the demand for water efficient shower controls is increasing. The addition of the Water Label on shower packaging has also made consumer product comparison of the water use between similar products easier and more transparent.

Hayley Thornley, Research Manager at AMA Research said: “Going forward the market is expected to increase by around 13% between 2018-2021. New housebuilding volumes are set to continue increasing despite the uncertainty currently surrounding the UK's exit from the EU, and prospects remain positive in this sector, supporting demand for showers installed in new build homes. In the commercial sector demand for showering equipment is likely to emulate from private new build and RMI activity in the hotels sector, care homes and health & fitness clubs/gyms.”

The shower equipment market will continue to fragment and the number of own-label products, often sold via the internet, is likely to increase. Online retailers are becoming significantly more important as consumers increasingly use the internet to source the best deals, but manufacturers are also selling spare parts and accessories direct to the consumer online.

Competition from non-UK suppliers is also set to grow, and pricing pressures are likely to remain intense due to the high level of imported product and the growing number of competitive distribution channels such as the internet, home improvement multiples and other major retailers.

The ‘Shower Market Report – UK 2017-2021 Analysis’ report 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.

Wetroom Market - 5 Key Facts

• The value of the wetrooms market has increased by 10% from 2014-2016 and offer significant growth potential in the UK bathroom market. 
• The floor formers and level access trays sector, dominates the wetroom market with 50% share by value.
• Wetrooms are installed in a wide range of end use sectors from aspirational residential and leisure applications to practical social housing and care applications.
• The market is becoming less fragmented with the leading 3 companies accounting for 35%. 
• Direct sales account for just under half of the market.  

These facts have been extracted from AMA Research's 'Wetroom Market Report - UK 2017-2021 Analysis' available for purchase now. 

Home Extensions Market - 5 Key Facts

• The number of householder developments has increased by 10% between 2014 and 2016.
• Single storey extensions were estimated to account for around 35% of householder developments in 2016. 
• Extensions of lofts and basements are a growing feature of the market, estimated to account for around 15% of householder developments.  
• In terms of regions, England accounted for 91% of householder developments in 2016. 
• The number of householder developments is expected to increase at a slower rate of around 2% per annum in 2018 and 2019. 

These facts have been extracted from AMA Research's 'Home Extensions Market Report - GB 2017-2021 Analysis' available for purchase now.