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Construction sector set for further growth

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The construction industry acts as a good barometer for the health of the UK economy and its recent performance supports growing expectations of a recovery – and growing demand for fleet support.

A key industry indicator of construction industry activity has shown that new projects have risen by 4% year-
on-year overall, driven by continued rises in new infrastructure projects.

The Glenigan Index, a summary of new construction projects, has revealed that activity in certain industry sectors is particularly buoyant, such as in the office sector where projects have rocketed by 63% for the three months to January compared to the same period last year.

Civil engineering projects also continue to strengthen, with the value of new infrastructure projects started in the three months to the end of January leaping 35% compared to last year.

The utilities sector showed 74% growth in the same period, with further rises anticipated to support growth in civil engineering workloads.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period and provides an indicator of developing activity in the industry.

Allan Wilén, economics director at Glenigan, says: “The January Glenigan Index shows continued growth in private sector activity, with further rises in office, retail and industrial starts painting a picture of sustainable private investment-led growth in construction output. Data shows that the value of main contracts awarded in the final quarter of 2013 was 21% higher than a year ago.”

However, within the public sector there is a very different story. In the sectors most dependent on Government funding, the underlying fall in spending continued.

Health project starts fell by 18%, following a 10% drop last year, while community and amenity starts were down by 44%, leading on from a flat 2013 for the sector.

The education sector, which the Government has pledged to protect from cuts, saw a 24% increase in project starts over the last three months.

This year also sees the beginning of a massive investment in the UK’s crumbling roads infrastructure.
Roads minister Robert Goodwill recently called on Britain’s road building companies to get ready for a massive increase in work ahead of the biggest investment in the road network since the 1970s.

The Government is tripling funding on the road network over the next eight years with more than
£24 billion to be spent on upgrading and improving the network until 2021.

By the end of the next Parliament, the Government will be spending £3bn each year on improvements and maintenance for the strategic network alone.

This locked-in funding commitment will support nearly 30,000 new jobs across the construction sector.
Goodwill says: “Funding certainty is critical to the construction industry in planning for the future and that is exactly what the government has delivered – with £24bn secure investment over six years and £50bn for the strategic road network over the next 15 years.

“We need to make sure we have the right people and equipment in place to deliver the 53 road schemes in preparation right now, plus the next generation of improvements over the next seven years.”

With a 43% increase in traffic expected in the coming decade, preparation is vital, he says.

Along with investing £10.7bn in major improvements for strategic roads from 2015 – 2020/21, the Government is also investing £6.1 billion in resurfacing 80% of the strategic network, with another £6 billion being spent on tackling potholes on local authority roads.

Flexibility key in sector

For any fleet, coping with growth can be just as challenging as managing decline.

The construction industry is a very fluid sector, with fleet size dictated by the number of contracts being
delivered at any moment in time.

Therefore, managers have to juggle a constantly changing fleet profile, adding and removing vehicles and allocating them to live contracts according to demand.

This dynamic requirement means there cannot be a one-size fits all solution for the fleet, especially when it comes to areas such as funding.

The most dynamic part of the construction industry fleet is commercial vehicles, where there is evidence of a wide range of funding options being used.

Analysis of some of the largest fleets in the sector shows that contract hire is the most commonly used main finance method, closely followed by outright purchase, with other funding types including finance lease, operating lease and lease purchase.

The flexible nature of the fleet means that companies in the sector tend to use a favoured funding method for the core vehicle fleet, where they can predict long-term requirements.

They then tend to supplement this with flexible rental and daily rental services to meet short-term demands for vehicles.

The frequent turnover of vehicles, along with the arrival and departure of large numbers of employees, creates a risk management challenge for fleet managers, especially as vehicles are often operating in a demanding environment.

Construction is a dangerous business and making it safer is one of the industry’s top priorities.

The construction sector accounts for 5% of all employees in Britain, but it is responsible for 27% of fatal injuries to employees and 10% of reported major injuries, according to the Health and Safety Executive.
This data doesn’t include fleets, but the focus on improving site safety filters down to everything
companies do, including transport.

There are mutual rewards too, as the initiatives that reduce vehicle accidents normally save money. Tight profit margins can be threatened by hidden costs in addition to bent metal losses, such as through lost working time and potential legal claims.

At Balfour Beatty, one of the biggest names in construction, a number of campaigns are aimed at focusing attention on safety, under the banner headline “Everyone home safe every day”.

A spokesman said: “There is nothing more important to us than the safety of our people and anyone who could be affected by what we do.

“We believe in always working safely, looking after each other so that everyone goes home safe from every site, every day.

“We call that uncompromising commitment to safety ‘Zero Harm’.”

Part of its Zero Harm commitment has been a wide-ranging fleet safety programme, driven through Balfour Beatty Fleet Services (BBFS).

The BBFS fleet numbers some 4,500 cars, 4,000 vans and 745 vehicles of more than 7.5 tonnes.

Results across the BBFS van fleet showed the number of own-fault incidents have fallen more than 20% to 0.19 per vehicle, while the number of own-fault and third-party incidents involving vans has reduced from 1,016 to 808 incidents.

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