Request a Call
We encourage you to read our privacy and cookies policy.
Last Updated:
22nd May 2018
Construction for water utilities across the UK regions is showing increasing promise for civils contractors and suppliers. The industry is now mid-way into the AMP6 cycle running between 2015 and 2020 and the signs are that the volume of construction projects is picking up.
As well as an upturn in underlying activity in water-related construction works, the industry is benefitting from the letting of work packages on some huge work projects, notably the £4.2 billion Thames Tideway project. Other major projects such as the £100 million Shieldhall Tunnel in Glasgow, Scotland’s biggest waste water tunnel, are also progressing.
An improvement in water industry investment is one factor behind Glenigan’s Construction market forecasts of a mild improvement in utilities construction project starts in 2018, after falls in 2015 and 2016.
Investment pipeline
Water companies are set to invest more than £8 billion in 2018-19, according to the industry body Water UK, as part of a £44 billion committed spend over 2015-2020. Major construction projects buoying up activity in the sector this year include United Utilities’ £300 million water supply scheme in West Cumbria, Severn Trent’s £300 million scheme to provide back-up supply in Birmingham and South West Water’s new £60 million water treatment works near Plymouth.
Whilst much of the construction work in the water sector is repair & maintenance, ONS figures show new water industry orders won by contractors were worth £983 million in 2016 and £631 million in 2017. This compares with orders worth just £211 million in 2014, towards the end of the previous AMP 5 period.
The water companies have sought to smooth the timing of letting construction work in the sector; traditionally this has surged towards the start of each AMP period only to fall away towards the end. Costain recently said that the AMP6 contracts - where it is working for Thames Water, Severn Trent and Southern Water - are performing well and that bid activity for AMP7 is well underway. The firm said several water sector clients were seeking contracts with early engagement from suppliers to help develop robust business plans before AMP7 formally starts in 2020. Elsewhere, Severn Trent Water and Dee Valley Water started a tender process last summer to prequalify firms to deliver its AMP7 water investment programme which will involve £2.3 billion of capital spend over 2020-2025.
Meanwhile, contractors are benefitting from a steady flow of new construction contracts in the water sector. In April, Wessex Water awarded Murphy a key contract to design and build Trym Tunnel Relief Sewer north of Bristol, reportedly worth £42 million and set to reduce flood risk north of the city. It forms part of a £2 billion investment programme at Wessex between 2015 and 2020. Meanwhile, Northern Ireland Water is reporting to be starting the search for partners on its £1.68 billion capital investment programme.
Tender opportunities
Political pressure on the ten water companies means they are likely to maintain investment in the medium and long term, which bodes well for tender opportunities in the sector. Aside from the threat of nationalisation under a future Labour government, the danger of water shortages is growing. A recent National Infrastructure Commission report, Preparing for a Drier Future, highlighted the threat, particularly in the drier South East. It called for more investment to increase supply in affected regions with more reservoirs and action to cut leakage.
Request a free demo of Glenigan today so we can show the size of the opportunity for your business.
Related sector topics:
Get the latest industry news and insights.
You can unsubscribe at any time. We encourage you to read our privacy and cookies policy.