According to the UK’s Office for National Statistics (ONS), investment in private housing developments in the second quarter of 2014 was at a record high, with growth continuing after a slight dip in 2012. Public investment also hit a new high after dropping off dramatically in 2008 following the economic slowdown.
Figures from the National House Building Council show that between July and September 2014, new home registrations reached more than 36,000-the highest total since 2007.
The demand is certainly there- UK charity Shelter states that Britain needs 250,000 new houses a year to accommodate its growing population, and new houses are currently only being built at around half this rate.
The transport and energy sectors are currently the focus of public investment, according to the latest UK Government Construction Pipeline. Transport projects account for £66.2bn of the £116bn due to be spent in the coming years- including Phase 1 of the HS2 high-speed national railway and the Crossrail link amongst the 119 projects currently planned.
Almost half of those are inside the M25 orbital motorway, which roughly borders the Greater London area. Also taking place is a £4bn road modernisation scheme, with projects set to take place through to 2021 to improve access for both motor vehicles and bicycles.
But with the population of the English capital rising by an estimated 80,000 a year, it’s thought to be a necessary investment, with Sir Peter Hendy, head of Transport for London recently suggesting that without it there could be "social unrest" amongst the city’s 8.4m-strong population.
The growth of the city’s population and status is reflected in its ever-changing skyline, with numerous ‘iconic’ skyscrapers completed in recent years including the Gherkin and the Leadenhall building-also known as the Cheesegrater-with more set to be constructed in the next few years. Which all begs the question of whether growth in the rest of the United Kingdom-which still includes Scotland, after its population narrowly voted against independence this year-is close to keeping up with the metropolis on its doorstep. The other dominant sector in the Construction Pipeline is energy, where projects are set to receive £14.8bn from the national government across 98 sites. And, with most energy plants run by private businesses, total investment in the sector is thought to be much higher.
Again, it’s thought to be a necessary investment-the National Grid recently voiced fears that the UK could experience power blackouts this winter, with spare energy capacity at a seven-year low.
The issue was exacerbated by a recent fire at the Didcot B power station, and structural problems with two nuclear power stations at Heysham and Hartlepool.
The potential for growth is certainly there, then-but while crane manufacturers are reporting that this potential is now manifesting itself as an economic recovery, crane rental companies are taking a more cautious view.
Richard Everist, managing director at crane manufacturer Liebherr UK, says: "There is undoubtedly a recovery taking place-in terms of cranes, the recovery is actually stronger than the improvement in the general economy.
"Mobile crane sales have increased 70% this year-there is no uncertainty or hesitancy as there was two or five years ago.
"There are two main drivers behind this. Firstly, the general economy is growing, and it is important that the media is reporting on economic growth, as this gives crane rental business owners the confidence to make those high value purchases. It is normal that if there are positive signs of growth, more investments will be made.
"This follows five years of underinvestment, so there is pent-up demand in the mobile crane sector. Before the recession, in a stable UK market I would have expected the UK market to buy around 200 cranes per year. Just before the recession there was an unsustainable bubble, when we were seeing around 300 cranes a year. During the economic slowdown it fell sharply to around 60-70 a year, but this year it will be back up to around 170.
"The other driver is that with the economy improving, more construction projects are being established, providing more demand for cranes.
"The recovery can be seen in the increasing demand for crawler cranes, which tend to only be bought once companies have projects in place which require them.
"Similarly, 18 months ago there was an oversupply of tower cranes, and now there’s a shortage-mainly driven by projects in London. "We began to see growth in the summer of 2013, and by the start of this year we already had a substantial order-book. It’s not a spike-I expect to see a similar level of sales next year."
Liebherr was well-positioned to recover quickly once the UK market picked up, says Everist: "During the recession, Liebherr did not have to reduce capacity because, as a global company, it was able to supply other markets while the UK was slow. Brazil was strong, as was Australia due to the mining boom- although both of these markets have now slowed down. The UK is recovering more quickly than much of Europe, which is providing UK companies with better value when buying cranes, thanks to the relative strength of sterling."
Mark Evans, sales manager at Kobelco Cranes Europe, has seen a similar trend: "There is definitely a recovery taking place. We’ve had a strong year, with orders from major contractors as well as rental companies, and it’s continuing to be strong.
"Growth is happening across the board-contractors are involved in numerous projects and they have said that they anticipate they will be busier for at least the next three to four years. Speaking to crane rental companies, they are rushed off their feet compared to a year ago.
"In mainland Europe, the market has been steady but has not picked up to the same degree as in the UK."
At Manitowoc, the company’s recently-established facility in Buckingham is now reaping the benefits of its location in the booming South East region, says Steve Barnett, commercial director for UK/Ireland and Scandinavia: "We’re seeing demand across the whole of the UK, but it is especially strong in the South East region-not just in London. From our experience in the crane industry the rest of the UK is keeping up with growth in London, but the South East and surrounding areas are particularly busy for us.
"We introduced a purpose-built facility in Buckingham in 2008-not long before the entire economy downturned. We’ve weathered the storm very well and we’re now seeing the benefits of the upturn in the past 12 months. Despite the setback the new facility has been working strong for the past four years and has already justified the investment."
Caution amongst rental companies AGD is involved in both crane rental services and crane manufacture, and managing director Robert Law has also seen consistent expansion in the London area: "London is the one place in the UK where we’re consistently busy. Around half of our fleet is always working in South-east England."
However, he believes that it remains to be seen whether a full recovery is taking place in the UK crane market.
"At the moment, we’re just hiring out equipment-there’s little demand for purchases. Only rental companies are buying, and rates are still very poor.
"Business has only very recently picked up, so it’s hard to tell if this will last. We’ve now had three months of good business, but you can’t judge a market on that.
"The question is, are construction companies currently making any money? They’re running on ‘legacy contracts’ that were priced two or three years ago when the market was more competitive, and so prices for jobs fell.
"Now the same companies are finding it hard to find and pay for sub-contractors, labour, materials and so on. In London there are waiting lists of up to six months for bricks, blocks and concrete. The price of concrete has increased significantly in the last 12 months. "Therefore in terms of investment there isn’t much appetite, as very few construction companies are generating any surplus."
Geoffrey Marsh, chairman at Marsh Plant Hire, raises similar questions over whether the recovery will continue unabated.
"At the moment we are exercising a great degree of caution," says Marsh. "We have three new cranes on order for the first quarter of 2015, but, until the New Year, we will not be looking into ordering any more.
"In 2006 we ordered 15 cranes for a total of £4m, which were delivered throughout 2007-8-then the market collapsed, and for the next three years we bought one crane a year.
"Currently we are buying around six-to-eight cranes a year, mostly replacements for the older models purchased around 2006.
"The key for a UK crane company looking to modernise or expand its fleet is the exchange rate of the sterling to the euro. In 2007 it was €1.47, and we bought our latest crane at €1.27-and economic experts are predicting that the exchange rate will continue to deteriorate for another year.
"Regarding recent talk of a recovery-these economic improvements have been made on borrowed money, because interest rates are abnormally low. But interest rates will have to come back up at some point, so having too much borrowed money in a business can lead to major problems.
"China has invested huge amounts in building, much of which are now unsold or unoccupied. Growth in emerging markets has slowed right down-the Russian rouble, for example, is at its lowest for ten years.
"All of this affects confidence in the market, so we are taking a cautious approach. I said at the beginning of 2014 that the first half of the year would be good, the third quarter would cool, and for the fourth quarter, we would have to see how the weather affects business. We have found that it has already been affected by wind."
Transport and power The growth that is taking place is being bolstered by two sectors in particular, says Mark Evans at Kobelco-the maintenance and construction of the country’s transport network and energy plants. "The infrastructure sector is a very strong area for us,
particularly in and around London," says Evans. "Some projects are demanding the use of cranes with Tier 4 engines, to comply with engine emission regulations. This demand is particularly strong in the London region, and so crane rental companies and contractors have had to re-align their fleets.
"Kobelco’s G Series of cranes, which cover capacities from 60t-250t, feature Tier 4 engines, as well as AIS (automatic idle stop), exhaust gas recirculation and diesel particulate filters, all of which help to reduce emissions.
"The rail development is a huge sector for us, and Crossrail in particular has created demand for Kobelco’s G Series cranes from all the major contractors involved in the project, due to their need for cranes with Tier 4 engines.
"We are involved in wind farm projects, and also in the energy sector there will hopefully be a number of significant nuclear power projects established soon. This includes not only the construction of new nuclear power facilities, but also a number of nuclear plants which are due to be decommissioned."
David Boughey, UK director at heavy lifting specialist ALE, predicts that as the projected spending in the government’s Construction Pipeline suggests, the energy sector will grow more quickly in the coming years. "The energy sector needs investment and, while projects are not necessarily visible at the moment, there is demand for energy and the investment in gas and nuclear power will come at some point," says Boughey.
"ALE was instrumental in what was the only significant plant built in the energy sector this year-the gas works at Carrington, Manchester. We were involved with the customer in the complete project-lifting pipework, providing marine works for the quay, supplying a crane to be used on-site, and taking pressure off the client by overseeing tasks throughout.
"There are no more energy plants scheduled for the next 12 months. Typically, it will take around another nine months until a decision is made on future projects, and 12 months after that until any orders come in."
Other sectors are also contributing to growth in the market, says Liebherr’s Everist: "There is no one specific sector driving growth-there are transport and infrastructure projects, general construction and retail projects. There is more taking place in London, of course, but there are projects across the UK-for example the Mersey Gateway, and the Forth Replacement Crossing."
Robert Law at AGD sees transport as a key sector, backed by other areas of commercial construction: "We’ve been working with projects on roads, canals, and upgrading railways, including countering damage from landslips and flooding on railway embankments, and working on railway bridges.
"We work on basements for commercial construction, such as offices and hotels, and there is still spending in student accommodation-we’re currently working on a project in Liverpool in that sector.
"We have also supplied cranes to the new Jaguar car factory in Birmingham, we have one crane at the Battersea Power Station conversion and we’re working on taking the roof off the Olympic stadium before it is passed on to West Ham United Football Club."
And as well as the construction sector, Manitowoc is also now looking further afield, says Steve Barnett: "In the UK, Manitowoc has seen success with all capacities of all terrain cranes. We’ve seen a big uptake in sales of self-erecting cranes, and top-slewing cranes are particularly popular for commercial builds. Demand has also increased in wake of the UK’s £60bn civil nuclear new build programme. With the recent introduction of our new models, crawler cranes are also expected to do well in the future.
"Particularly popular across the UK is the top-selling 300t Grove GMK6300L. For this class of crane there is no machine that compares in terms of its capabilities in tight job sights. In London especially, this is of course extremely beneficial.
"We’ve also started to see investment in rough terrain cranes with the recent appointment of our dedicated RT/industrial crane distributor Universal Cranes, based in Peterborough. This appointment will enable Manitowoc to penetrate new markets in the UK including mining, boat yards and the industrial segment thanks to the dealership’s extensive experience in these fields.
