The infrastructure industry was recently thrust firmly into the spotlight by a combination of events. These included in the UK the award of contracts to build the first phase of the controversial second high speed railway project between London and Birmingham.
Struggling infrastructure construction company and support services supplier Carillion featured as one of the three companies appointed by the UK government, despite its recent well documented problems.
It will work with the UK's Kier Group and France's Eiffage Genie Civil in the CEK joint venture.
Supporting 16,000 jobs
The expected total value of the contracts including both Stage 1 and Stage 2 (the full construction phase) is currently estimated to be worth £6.6 billion, said transport secretary Chris Grayling in the official announcement.
Stage 2 will commence in 2019. Along with Stage 1, it is expected to support 16,000 jobs across the country. The stages are expected to generate 7,000 contract opportunities. Of these, around 60% are expected to go to small or mid-sized companies.
Keith Cochrane, interim chief executive officer at Carillion, said: “We expect the UK Government's objective of generating economic growth through investing in infrastructure to continue creating opportunities for us to grow our business in these core markets."
Moody's 2017 outlook
In its 2017 construction global outlook paper, debt rating agency Moody's Investors Service writes of healthy prospects for infrastructure construction. It points to increasing traffic volumes, especially in emerging economies.
The trend towards urbanisation should lead to expansion of roads and railways, it says. Electricity Transmission and Distribution (T&D) networks should see modest growth in developed countries to improve security of supply.
In emerging countries, it expects high and growing demand from new projects. Government budget constraints, however, may limit infrastructure spending. Low prices for power, oil, gas and coal will continue to weigh on capital expenditure.
This will affect conventional power generation, upstream facilities for oil and gas, as well as mining. Renewable energies, especially wind, will continue to benefit from strong political support and efficiency improvements.
Moody's notes that affordability is the main constraint on the sector.
Trump and infrastructure construction
Phil Seefried, co-founder and chief executive officer of Headwaters MB, and Mark Wilson, a UK-based partner at specialist corporate finance firm Catalyst Corporate Finance, issued a comprehensive note on the topic late in June.
Their observations include the suggestion that infrastructure will be among the key industries to watch as the political landscape in the USA begins to settle down into the reality of the Trump administration.
They see opportunities for US and UK businesses and investors. These will arise as president Trump begins to fulfil election campaign pledges that he will deliver major programmes of public works.
Sectors in favour include infrastructure industry
Investors remain convinced that the US president’s administration will create exciting new opportunities. Infrastructure, where the president has promised huge programmes of public works, is a key focus.
Catalyst's Wilson said: “Looking beyond the headlines, the stable economic backdrop continues to excite investors in the US, while US investors have the strength and confidence to pursue international opportunities.
“For UK businesses, opportunities in sectors such as infrastructure and natural resources look especially enticing in a Trump context, but there will be possibilities throughout the marketplace; UK businesses can also expect to continue to be targets for US investors.”
UK can teach global infrastructure industry a few lessons