Infrastructure activity is increasingly reliant on £100 million-plus projects
Although the infrastructure sector as a whole has been seen as remaining relatively strong, according to Glenigan analysis projects with a construction value of £100 million or more have increasingly dominated new project starts over the past year.
The value of underlying project starts, which excludes £100 million plus schemes, fell by 18 per cent last year. Despite this decline, overall sector starts remained firm thanks to an increase in major transport projects.
On the other hand, government statistics released last week showed new infrastructure output in the 12 months to the end of 2008 was 15 per cent higher compared with the previous 12 months but the fourth quarter of 2008 fell by 15 per cent from the previous quarter.
Starts for large projects improved in September and October with several large road contracts. These, combined with the surge in large project starts expected for March and April this year, will sustain activity in the sector for some time.
Despite the fall in underlying construction starts, 2009 looks set to be a positive year for infrastructure.
Several large projects are due to start on site this year, including the £4.5 billion M25 motorway widening. Preparations for the London Olympics will also stimulate transport infrastructure construction starts in the capital.
Rail will be a key subsector in the next 18 months, with the £16 billion Crossrail recently seeing its first contracts awarded on site and work continuing on Thameslink.
The concentration of activity on large, high profile schemes has implications for contractors and suppliers. The drop in the underlying flow of projects will intensify the squeeze on small and medium-sized civil engineering contractors.
The importance of major schemes also leaves overall sector workload vulnerable to potential delays in the initiation of planned projects.