“The UK water industry is going through some interesting changes”, says Michael Norton. As someone who has spent all his working life in the water sector, he is better placed to comment than most.
Mr Norton has just been appointed the new managing director of consulting engineer Halcrow’s water and power division, after 22 years with the business. In that time he has worked on a wide range of water related projects, many of them overseas. In the mid nineties he was regional director in charge of Halcrow’s South American water operations. More recently he was development director of the water and power division before taking over the reins from long-serving John Lawson in July.
During his years with Halcrow, he has seen its water business grow from fewer than 100 people to almost 1,000 today. “It’s been a very exciting 20 years at Halcrow,” he says. “There has been a lot of growth both in and outside of the UK. The big growth area has been in river engineering and flood defences.”
In 2006 Halcrow’s water and power division accounted for approximately £70 million of the total group turnover of £330 million. UK projects today account for 70 per cent of the water and power revenue. The Environment Agency is the whole group’s single biggest client, and Halcrow also works extensively for most of the large water companies.
“Some interesting things are happening here,” says Mr Norton, who graduated in civil engineering from Leeds University in the 1970s, “not least the changes in ownership, with pension funds and equity investment funds coming in and taking large shares. I think this is driving changes in procurement behaviours.”
He says that the new type of owners are “getting back to focusing on their core business”. He explains: “The procurement of capital works is being much more oriented towards value for money, as opposed to delivering services in the traditional way. This is manifesting itself in big pushes [from clients] for volume discounts. We are getting more requests for us to lower our rates if we do more work. It is manifesting itself in us having to accept, in some cases, poorer payment terms. In other words, it’s taking longer for us to get our money. And we are being measured much more carefully against key performance indicators.”
He notes the rise in the numbers of procurement specialists employed by water companies, creating a tougher commercial environment, but says that this “doesn’t necessarily mean bad things for the supply chain. It can be quite the converse”. It brings the best out of companies like Halcrow, he says, and “concentrates the mind”.
Further change in the UK water scene will come as the industry moves to the next regulatory cycle, from AMP 4 to AMP 5, says Mr Norton. ”Climate change is going to have an effect on AMP 5 capital investment programmes, and the EU Water Framework Directive will drive a lot of new projects.” A lot of rivers will need cleaning up, he says, and there will need to be more control of the nitrogen and phosphorous content of wastewater effluent, so more wastewater treatment will be required. He believes that in the longer term we will see more re-use of treated waste water.
Despite a summer of floods in several parts of the country, after years of hosepipe bans, would seem to indicate poor planning on the part of the UK water industry, Mr Norton admits. However, he insists that UK water companies do “a pretty good job” and compare well with other European countries in the service they deliver for the price that customers pay.
In addition to tougher contract terms being imposed by UK clients, there is also more competition, Mr Norton says, not just from UK companies bidding for work, but from companies around the globe. With his background in international projects, Mr Norton plans to not only increase Halcrow’s international workload in water and power, so that overseas revenues account for 50 per cent of the total by 2010, but also to make further benefit of Halcrow’s network of overseas offices. “One of the ways consulting engineers can add value worldwide is to make use of their international skills network,” he says. “This is a challenge for all consultants, to truly globalise our skills resource.” For example, he says, Halcrow has an excellent mathematical modelling team in its Buenos Aires office, which does modelling of rivers for the Environment Agency and modelling of drinking water networks for clients in the USA.
And the Islamabad office does a lot of reinforced concrete detailed design for the whole Halcrow group.
As well as benefiting from local expertise, globalising the operations enables 24-hour working, particularly on huge projects like Lusail, a new city being developed on the outskirts of Doha in the Gulf state of Qatar for a population of 200,000. Halcrow is designing all of the water infrastructure.
As well as the Middle East, Mr Norton is targeting Central Europe, India and North America for international expansion. In recent years Halcrow has acquired a Canadian structural engineer, Yolles, and a US maritime consultant, Hans-Padron Associates. Both businesses have since been diversifying to offer the full range of Halcrow group services, including water engineering.
“Looking to the longer term,” says Mr Norton, “we’ve got water businesses starting up in Australia and China.”
As he has been involved in developing and directing Halcrow’s strategy in the water sector for a couple of years already, he won’t be “turning the business upside down”, he says, but he does have his own slant on the business, he says. Specifically, his plans for further internationalisation represent the mark he plans to make at Halcrow. The aim is not just to have offices around the world filled with British expats, but to build sustainable businesses in overseas markets with local staff and a globalised workforce.
Mr Norton always wanted to work in the water industry, as early as his student days. Specifically, he hoped for a career in water resource planning because “it seemed intellectually stimulating and I could see opportunities to travel a lot”. What he had not anticipated was that his career would actually be much more involved with designing and supervising the construction of water-related projects around the world.
“It still gives me quite a kick to see things we’ve designed actually get built,” he says.
Is it not frustrating to work on projects that never actually get built? He responds: “There’s perhaps a perception that consultant do one design to every 10 feasibility studies, but it’s not quite like that. Most of the things we do feasibility studies for do end up as projects.”