A strong period for the UK construction industry is reflected in a growing crane rental market, with new projects and investments in fleet expansions taking place. Daniel Searle reports.
In 2014, the UK construction sector represented the second-largest national market in Europe last year behind only Germany, according to data published by the CECE (the Committee for European Construction Equipment).
The housing sector, including both public and private projects, had a total value of £29.2bn. This was after it had fallen from around £25bn in 2007 to £15.5bn in 2009, according to data from the Office of National Statistics.
Investments in schools and university buildings broke the £10bn mark for the first time, and the entertainment sector accounted for projects worth £6.41bn, another record and the highest total since 2008.
£15.3bn of investment was put into infrastructure – this total had remained flat since 2011 but in 2014 was driven by a fast-growing electricity sector that represented more than one-third of the total, after more than doubling in value since 2012.
However, the CECE data showed a declining rate of growth in each consecutive quarter of 2014, from around 45% in Q1 of 2014 down to around 20% in Q4. So there was no guarantee that 2015 would prove to be as successful as the prior year.
To the benefit of the construction and crane rental industries, the expansion continued. In the second quarter of 2015, investment in housing rose above £8bn for the first time, and infrastructure projects accounted for a record total of £4.41bn.
The Chartered Institute of Purchasing and Supply said that the construction sector had expanded at a “healthy pace” in Q2. The Institute’s index, on which a rating of more than 50 signifies expansion, had the industry rising in August to 57.3 from 57.1 in July.
Housing and beyond
The crane rental industry has benefitted from growth in the housing market and other areas, says Steve Battison, crane and transport manager at NMT Cranes: “At the moment pretty much every one of our cranes is in use. Currently, at least 75% of our work is in new construction projects, for which we supply cranes with capacity 80t and below, as well as tower cranes.
“However, that proportion isn’t standard – we also do a lot of work in the entertainment sector, which keeps us ticking over, particularly in summer.”
Despite the shortage of operators in the UK, NMT has expanded its operations with a depot in Birmingham, around 70 miles north-west of its Bedford headquarters, says Battison: “We have more cranes than operators – we’re utilising all of our labour and could do with more staff.
“Geographically, we always get local work – from Leicestershire down to London, including Oxfordshire and Cambridgeshire. We have a depot in Birmingham, which we opened in July and which we’re currently building up. We started with a couple of cranes there but will hopefully add a further six by next year.
“We had quite a lot of work there, and had staff with contacts in the region. We also knew that we’d be able to attract drivers in the area.
“Our busiest cranes are our tower cranes and our 80t-100t range. We also hire out a lot of 30t-50t cranes and steel erectors on long-term hires of one month or longer, due to the amount of new building taking place.”
Oliver Arnold is managing director of Quinto Crane & Plant, which also does business in the central regions of England. “Quinto offers CPA and contract lift services across the East of England, the East Midlands and Greater London.
“We have found the crane hire market strong across these areas and we have even seen demand further afield. Naturally the strength of the construction sector is a factor, however Quinto works across a diverse range of industries including energy, manufacturing, engineering, pharmaceuticals, food and pet food.”
At Bernard Hunter in Scotland, the company’s business is being driven by a similar combination of housing projects and other work.
“At Bernard Hunter Mobile Cranes we are maintaining a well-balanced and growing work load,” says Mark Rafferty.
“We operate within a variety of sectors including heavy engineering, dock work, house building, construction and the power industry. The firm operates within the central belt region of Scotland and can see most sectors have grown over the past couple of years.
“The increasing need for houses has been most noticeable, with large housing sites being started in the area. Larger construction projects have also been started that were previously shelved during the recession.
“The decrease in the oil industry has seen some projects slow down but this is mainly in Aberdeen and not too disruptive in the Edinburgh area. Scotland, excluding Aberdeen, does not suffer from large peaks and troughs in the economy like other areas. The market normally keeps well-balanced and constant.
“I believe that not spreading ourselves too thinly and supplying a competitive price along with maintaining a high quality and reliable service is key to our success and growth.
“Looking forward, it is difficult to tell how the market will be. Cranes tend to be hired on a very shortnotice or short-term basis.”
The company has continued to expand its fleet recently, but this represents its ongoing approach rather than being inspired by the current strength of the industry, says Rafferty: “Bernard Hunter is constantly investing and continued to renew and buy new cranes and equipment even throughout the recession.”
At AB2000, a rental firm also based in Scotland, the company has a similarly positive outlook. Crane manager Brian Kirk says:
“The rental market at present is fairly steady and whilst utilisation is strong, the hire rates could possibly be slightly better to take advantage of how busy we are.
“The construction sector is particularly busy at present and house-building seems to have really taken off again. While all crane types are required, the construction sector mainly uses those of 50t-60t capacity, which is making these extremely busy. We are based in Glasgow and the whole of the central belt in Scotland has picked up, so cranes are hard to source.
“The rest of the year looks as though it should stay as it has been, and there is nothing on the horizon that would make us think that this shouldn’t carry on into next year.”
Notes of caution
There are reasons to be cautious amongst the current success, however. The wind farm industry was hit when the UK government announced that from April 2016, any new projects in the sector would be excluded for its subsidy scheme for renewable energy. Looking at the overall market, current economic uncertainty is having an impact, says Geoffrey Marsh, managing director at Marsh Plant Hire:
“The market has cooled since last year. There will be a great deal more uncertainty in 2015 and this will continue into 2016. Customers have work but people are not prepared to start the projects at the moment due to a lack of confidence-the UK market is dependent on the world market and on exports to the EU. The recent financial upheaval in China has a knock-on effect in emerging markets, and the US FED Chairman Janet Yellen is considering putting interest rates up, which would also have an impact.
“The petrochemical sector has been grinding contractors into the ground by reducing its costs. In the shale gas industry in the US, there was a massive spend to get the industry out of the ground, accompanied by massive borrowing, much of the capacity is being shut down. The only way the price of oil will rise is if there is a reduction in output, and although Saudi Arabia has recently lowered its spending, there has been an increase in output from Iran. However, we have benefited from lower fuel costs for mobile cranes.”
The construction industry is also facing a problem, says Marsh: “The construction sector now accounts for less of our business – we made an effort to diversify. The current issue facing the UK construction industry is a lack of skilled trades. Every time a government allows a recession to take place, skilled trades leave the industry and don’t come back. So any increase in house construction is not going to be huge.”