The ground engineering sector is something of a bellwether for how the wider industry is going to perform, as most projects require some kind of input from this market and it generally happens at the front end.
So while it was among the first to get hit as the industry entered recession, it was in the construction vanguard as the wider economy returned to growth.
Bam Ritchies general manager Alasdair Henderson has seen things improve across the board in the specialisms in which the firm operates.
“There’s an overarching confidence in the sector,” he says. “The drilling and blasting part of our business is really picking up, which shows infrastructure spending is increasing [in areas] such as highways and bridges in Scotland, rail across the country and major projects in London.”
“HS2 has a large demand, which will create a resource restraint around ground investigation”
Alasdair Henderson, Bam Ritchies
He points out that the Northern line extension and Thames Tideway are big opportunities for the industry. “Hinckley Point C is very good for us with the Kier-Bam joint venture,” he adds.
However, he cautions: “We’re seeing all the signs of recovery that everyone else is,” he says. “But ground investigation is 25 per cent of our business and competition means margins are lower than geotechnics generally.”
Skills and productivity threats
Mr Henderson says that while infrastructure has been busy for a while – with, for example, the CP5 rail frameworks cascading down into the supply chain – there are going to be skills and therefore productivity shortfalls elsewhere.
“High Speed 2 and Crossrail 2 seem to be coming along but HS2 has a large demand, which will create a resource restraint around ground investigation,” he says.
“It will get the resource it needs but HS2 will impact the resources other projects get.”
The lag between Crossrail and HS2 will also mean a relative dearth of work in this sector.
“We are in a post-Crossrail dip before other jobs begin,” Bachy Soletanche managing director Chris Merridew says.
He adds that although water is moving in a positive direction as the AMP5 contracts come to an end and AMP6 begins, this will represent another example of peak and trough, as the foundations are at the front end.
Beyond the capital
Nevertheless, Mr Merridew says infrastructure bright spots lie around the corner, ones which will add to the “reasonably steady spend in rail”.
“Thames Tideway will come online at the back-end of next year and we are seeing movement outside London. Coventry, Manchester and the North-west are always busy,” he says.
Van Elle CEO Jon Fenton agrees that work is expanding out from the capital. “Commercial will spread out from London, in particular the North-west and the Edinburgh-Glasgow corridor.
“Infrastructure is coming along with roads, bridges and earthworks retention nationwide”
Jon Fenton, Van Elle
“East Anglia, London and the home counties are also going well – everywhere is really, but some are just better than others,” he says.
Van Elle is bullish about its workload in all its sectors, which, geotechnically speaking, is almost all of them.
“Infrastructure is coming along with roads, bridges and earthworks retention nationwide,” Mr Fenton says.
“Rail and housing will be important for us and these two will represent about 25 to 30 per cent of turnover for 2014/15, whereas it was about 18 per cent in 2013/14.”
Another shift for Van Elle is in the value of tenders it believes it will win this financial year.
“Our clients are coming to us with higher-value projects – over £2.5m – and we will probably be doing jobs of up to ££6m,” group deputy managing director Vic Handley says.
Where the work is
Mr Merridew says that Bachy is also seeing workloads increase away from the South. “The Midlands is starting to move with preparation for highways work, high-rise residential and multi-use sites,” he says.
In addition, the company has won a retail job in Leeds as this market starts to come back, with projects that stalled during the recession coming back online.
“There is a change to collaborative working with specialist partners as opposed to specialist subcontractors – that is more than just a semantic difference”
Alasdair Henderson, Bam Ritchies
Regional work has also improved markedly for Bam Ritchies. Contracts have been thin on the ground in the £200,000 to £1m project range, but this area is now seeing real traction as the regional market improves.
Mr Henderson sees the sector changing from a cultural point of view, both in terms of perception and what this translates to.
“There is a change to collaborative working with specialist partners as opposed to specialist subcontractors – and that is more than just a semantic difference,” he says.
“It’s indicative of a mature market that recognises that lowest cost is not the same as best value.”
What does this mean for the business? Mr Henderson’s positivity is reflected in the company’s targets for 2014. “Our turnover for this calendar year is aimed at about a 10 per cent increase over 2013.”