Utilities

The Utilities sector has been a long term growth area for construction, with increased investment by the regulated utilities and the energy driving growth.

However, the rise in project starts faltered last year as shifting Government energy policy, involving a flurry of cuts to renewable energy subsidies, caused investors to reappraise planned projects. In addition to ending or reducing the viability of schemes, the nature of some announcements also contributed to an air of uncertainty in the sector, deterring investment.

Indeed the policy change impacted on project starts more rapidly than initially anticipated. Whilst the AMP6 programme has been gathering momentum, increases in water and sewerage activity were insufficient to offset the impact of reduced energy developments last year, with the value of underlying starts falling 22%.

The current year is expected to be one of consolidation for the utilities sector, with the value of underlying projects forecast to edge up 1% during the year.

However, sector workload is also poised to benefit from several high profile projects that will provide a long term boost to output. Work is starting this year on the £4.2 billion Thames Tideway Tunnel and will provide significant lift to sector output from 2017 onwards. In addition, the much delayed Hinkley Point ‘C’ nuclear power station continued to promises to boost sector activity over the medium term.

Furthermore whilst the shift in Government policy has hit planned investment in onshore wind and PV projects, the need to replace and enhance the UK’s aging generating capacity remains. Lower fossil fuel costs and the pressing need for additional generating capacity is set to prompt increased investment in new gas fired power stations over the next few years.