UK infrastructure – local delivery vs. global competition

Hinkley Point represents a huge opportunity for UK construction. If this was ever in doubt, then a recent £100 million order for steel reinforcement underlines the scale and transformative nature of the work that will be needed to deliver the £18bn project, where EDF have undertaken to spend 65% of the total budget with a UK supply chain.

The approval of Hinkley is likely to set off its own chain reaction, with 16 GWe of generating capacity due to be approved and constructed by 2030.  Commentators have noted that approval of Hinkley Point, the first go-ahead for a nuclear power station since 1987 is likely to accelerate the pace of sign-offs based on a range of nuclear technologies.  As a result, attention will switch to delivery rather than the politics and economics of the business case – construction will once again be in the spotlight.  Will this be another London 2012 moment?

The nuclear programme is of course a great opportunity for UK construction to build on.  Industry has been calling out for years for large scale, long-term programmes to drive investment and there has been huge frustration associated with repeated delays.  Since 1987 when Sizewell B was approved there have been relatively few mega-programmes in the UK, High Speed One, Olympics and Crossrail for example, whereas in France over 2,000km of the High Speed Rail network has been constructed since the early 1980s.  The scale of this investment has enabled European contractors to develop scale and reach and it is little surprise that many of the JVs bidding for HS2 work will feature overseas partners with financial clout as well as rail expertise.

It is clearly essential that UK suppliers, programme managers, engineers and contractors secure leading roles on future programmes to be able to take advantage of future opportunities to drive investment and growth.  The sheer scale of the civil and services engineering requirements are likely to be transformational for businesses that secure a leading position.  However, Nuclear is a global industry and the UK construction industry will find itself competing in a much larger market for home-grown opportunities.  It’s no coincidence for example that US Engineering giant Louis Berger has recently chosen to relocate its international HQ in London.

Accordingly the prospect of the 3 Hs, Hinkley Point, HS2 and Heathrow securing the go-ahead is no excuse for complacency.  They will make the UK a magnet for global skills, innovation and resources, but just like Premiership Football, having the work located in the UK doesn’t mean that the opportunities will automatically go to local talent.  Post-Brexit, the UK’s future will rely on competing successfully on a global stage. 

Ironically, the future growth of the UK’s domestic infrastructure programme, may accelerate the entry of global competition into what are currently local markets.  This will create opportunities as well as threats – new ways of working, new sources of investment and fresh innovation.  UK businesses often thrive when they compete head-on in international markets, but construction has often been sheltered by its focus on domestic clients and programmes.  This current state is unlikely to last for long.  The opening up of UK markets has probably come closer as a result of the Hinkley Point decision and as a result, delivering locally in the UK will increasingly mean thinking, and competing on a global stage. 

As published by Building on 20 September 2016

Simon Rawlinson

Partner - Head of Strategic Research and Insight +44 (0)20 7812 2319 Ask me a question
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