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Steel: Uneven fortunes for steel firms but offices offer growth

Commercial market among those proving lucrative but skills may hinder progress.

It’s been a mixed year for the steel sector. Many firms saw modest rises in turnover and profit, but some were not so fortunate.

Mabey Bridge had a difficult 12 months, closing its infrastructure division at Chepstow and making a loss - albeit one that was smaller than its previous year.

Overall, however, prospects for the sector are brightening after a difficult recession, with work beginning to pick up across the board.

“The sector has performed better than in the past few years - there’s a lot more opportunity,” says Ian Lawson, chief executive of Severfield, which recorded profit this year despite having a mixed period itself, with repairs to steel bolts on the Leadenhall Building set to cost the company up to £6m.

Strong sectors

The industrial sector has been strong, driven by demand for new distribution centres and warehouses in different regions, with growth evident in the Midlands particularly.

“It’s a more regional sector, because you often need reasonably sized greenfield sites and distribution sites are often located near good motorway links,” says British Constructional Steelwork Association director-general Sarah McCann-Bartlett.

“We’ll see continuing strong growth in the office sector for the rest of 2015 and into 2016”

Sarah McCann-Bartlett, BCSA

Education is also offering significant amounts of work, she adds, with the government’s Priority Schools Building Programme filtering through to boost the sector. “Universities and colleges and their accommodation [needs] have also been steady,” Ms McCann-Bartlett says.

As well as industrial and education, the commercial office sector is coming back strongly to provide work for steel contractors.

“Commercial offices in London are a large part of our work and there are lots coming out for tender soon,” Mr Lawson says.

The Severfield chief told Construction News in June that the firm planned to bid for supply contracts on a number of London projects, including the ‘Gotham City’ development and the new Tottenham Hotspur stadium.

Regional epicentre

Ms McCann-Bartlett acknowledges that London and the South-east are “very busy” thanks to the revival in the commercial sector.

“We’re pleased to see investment ticking up in private offices, many of which were on hold during the recession. It traditionally has been a very strong sector for structural steelwork.

“We’ll see continuing strong growth in the office sector for the rest of 2015 and into 2016, with growth of about 14 per cent in volume of structural steelwork consumed in both years.”

The industrial sector will also continue contributing to workloads, although growth will be slower than in 2014.

However, Ms McCann Bartlett expects to see “about a 12 per cent increase” in the volume of structural steelwork used in the industrial sector in 2015, largely from warehousing and distribution projects and not retail. “Retail, like supermarkets, has very much gone off the boil,” she says.

Ones to watch

Infrastructure could also be a sector to watch, with Mr Lawson highlighting the transport sector’s major investment plans. Network Rail’s spending, however, has been reined in and projects put on hold, which will limit the work available in rail this year.

The steel sector still has spare capacity to fulfil this work, although Mr Lawson says margins are at a level “probably less than we should all be earning”. Ms McCann-Bartlett agrees, saying that “there is still plenty of capacity in the sector”.

“The industry is seeing the effect of the lack of investment in skills during the recession”

Sarah McCann-Bartlett, BCSA

“It’s not as available as it was during the recession on unrealistic project timelines, but there is suitable capacity for all kinds of projects, from offices and industrial through to infrastructure such as bridge works,” she says.

“We’re seeing prices firming up, but we’re not seeing the sharp increases that we’ve seen in some other construction materials.”

The skills shortage is a potential constraint on growth, however, with both Mr Lawson and Ms McCann-Bartlett citing it as the sector’s biggest challenge.

“The industry is seeing the effect of the lack of investment in skills during the recession,” Ms McCann-Bartlett says.

“Our sector is working hard to take on apprenticeships now, but while the cost of steel has remained relatively flat, the cost of labour has risen, which is why the cost of structural steel has risen.”

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