UK Trade and Investment and BIS are to explore whether UK contractors could win work overseas on “government to government” deals, chief construction adviser Peter Hansford has told CM.
He said this could involve UK government lending to, or otherwise supporting, clients overseas – on condition that UK contractors were brought in to carry out the works.
An alternative model might involve the government acting as a partner in bidding consortia.
In addition, Hansford said there would be moves to explore whether UK contractors could combine forces to have the financial “strength and confidence” to take on more overseas work.
He told CM: “Yes, there are barriers to exporting overseas – I wouldn’t say that fears over bribery and corruption and worries about not having a local supply chain are ‘excuses’, but I would say they are things that can be dealt with.”
"UK construction in professional services has a real global lead position, but we’re less strong in overseas contracting. If you look at the global competition, some of the French, Spanish, German or Korean contractors are much stronger internationally."
Peter Hansford
But he added: “We’ll be exploring the potential [for groupings with or without government] and I can’t say for sure these things will happen. However, one thing that will be happening is a new marketing campaign for the construction sector under the ‘Great’ campaign run via various overseas embassies.”
The need for UK construction to look beyond its own borders was underlined last week by the Global Construction 2025 report, which highlighted how output growth in the coming decade will be concentrated in developing economies.
Overall, construction output is forecast to grow by 70% by 2025, but China, India and the US will account for almost 60% of all global growth. Meanwhile, construction markets in Western Europe will be almost 5% smaller by 2025 compared to 2007.
The report identified a new generation of “Asian Tigers”, with Indonesia, Vietnam and the Philippines becoming increasingly attractive with construction output forecast to grow at around 6% a year. Turkey and Russia are also expected to chalk up annual growth around 5-6%. However, the star performer is expected to be Nigeria, with an average annual construction growth rate of 9%.
Meanwhile, the UK is expected to outperform most of its EU neighbours with output growth of around 2% a year to 2025 – partly because it’s recovering from a more severe slump.
“We see this area as being one of massive opportunity, as global development grows at a quite extraordinary rate,” said Hansford. “UK construction in professional services has a real global lead position, but we’re less strong in overseas contracting. We’re still doing bits of work overseas – for instance Laing O’Rourke is in Australia and Balfour Beatty in North America. But if you look at the global competition, some of the French, Spanish, German or Korean contractors are much stronger internationally.”
Zaha Hadid’s Heydar Aliyev Centre in Azerbaijan is an example of the type of project UK contractors could become more involved in
According to BIS analysis in UK Construction: An economic analysis of the sector, published last week, UK exports in construction contracting were worth £1.65bn in 2011, while overseas contractors carried out about £1bn of work in the UK in that year.
But there was a marked trade deficit in construction products, with imports to the UK worth £6.2bn more than exports from it. Another priority under the new Industrial Strategy for Construction is therefore reducing this trade gap.
Hansford said that the strategy would be to promote “import substitutions” – manufacturing more products in the UK and thereby reducing both imports and transport-related carbon emissions.
He said that the key to this would be “presenting a clear picture of future workload, then manufacturers will invest in UK facilities. For instance, Pilkington has taken the bold step of investing in a new glass manufacturing facility in St Helens. No one will ever achieve certainty [of future workload] but when we can provide a picture of public and private workload, we think we’ll get more commitment to build up the manufacturing base.”
Japanese-owned Pilkington received a government grant of £5m towards its new £36m facility, which opened earlier this year and will specialise in manufacturing high-performance energy efficient “green” glass.
