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Ground engineering: Infrastructure booms but regional outlook uncertain

Roads and rail providing opportunities as big ticket schemes keep on coming.

The ground engineering sector is the first to get hit by a downturn but also the first to improve when the broader market recovers.

One company benefiting from the industry’s upturn is Van Elle, which turned over £46.6m in 2013/14, up from £35.7m the previous year.

Group director Vic Handley says it’s hard to forecast revenue when things are going so well. “We are budgeted to do £83.5m but we keep exceeding our expectations.”

Divisional director for restricted access Dave Warner says growth in rail is making a big contribution to this. “We have doubled our Colmar road rail [piling] vehicles to eight in the past 12 months,” he says, with Mr Handley adding that the firm will have at least 10 by the end of the year.

Range of bright spots

Growth in the infrastructure market is not limited to rail. “The civils market is looking good and is being driven by the push for smart motorways,” Mr Warner says, adding that this includes improvement work on gantries for electronic signage - a quick and cheaper way to manage traffic flow compared with widening.

Other bright market spots include housing, where activity is being recorded nationwide, and wind turbines, particularly on projects that require just a single installation.

“Once the independence referendum was out of the way we saw a surge of work; we do not see a lot of competition up there”

Vic Handley, Van Elle

Regionally, Van Elle sees Scotland as a burgeoning market and plans to expand its presence north of the border. “We are turning over about £10m there and are expecting to take that to £25m in the next three years,” Mr Handley says.

“Once the independence referendum was out of the way we saw a surge of work; we do not see a lot of competition up there.”

Still hugely competitive

Bachy Soletanche, part of the Vinci group, is another of the major players making hay while the sun shines.

“Across the business, this year is certainly better than last year,” says managing director Chris Merridew, with the firm looking at a 10-15 per cent increase in turnover for 2015.

But Mr Merridew concedes that profit is crucial and that the focus within this “relatively modest increase in turnover will be on margin, as it is still a very competitive market out there”.

Workloads are “still very London and South-east-centric”, he says. Bachy has been active on Crossrail but, with this project coming to an end, its turnover will be maintained through an increase in smaller jobs that will replace the big ticket schemes.

This said, High Speed 2 and the Thames Tideway Tunnel will still provide large portions of geotechnical work for firms such as Bachy that operate in the large-scale infrastructure markets.

Mr Merridew says the company is also benefiting from a lot of work in the North-west triangle of the M62, M57 and M58. Further south, he anticipates continued buoyancy in the Midlands via work in and around Coventry and Birmingham.

Where the work is

Private commercial and private residential are also viewed as growth markets by firms in the sector, according to Martin Blower, who is both chair of the Federation of Piling Specialists and managing director at geotechnical firm Bauer Technologies.

“The regions are generally flat and we do not expect this to change except for Scotland”

Martin Blower, Bauer Technologies

He says FPS members are seeing plenty of activity in these “fully recovered” sectors, with firms that offer CFA, bored and driven precast enjoying growth across the country.

While he agrees with Mr Merridew that the infrastructure market in London will shift with Crossrail contracts winding down, he believes another scheme will pick up some of that slack.

“The largest project going to site is the Battersea Northern line extension,” he says, with Laing O’Rourke’s Expanded Piling and Skanska’s Cementation divisions delivering the large-diameter rotary-bored and diaphragm walling work.

Outside of the South-east, Mr Blower isn’t as optimistic as Van Elle’s Mr Handley. “The regions are generally flat and we do not expect this to change except for Scotland, [which has] the M74, the Forth Bridge, coastal protection and ports and harbours,” he says.

He adds that FPS members have reported recovery to pre-recession levels since Q3 last year, but that there is still capacity in the market.

“My own view is that significant resources were brought into the market during the Crossrail days and the drop down from this work has left us with more new plant as well as trained people,” he says.

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