Whilst construction activity in some civil sectors may well be on the wane, contractors may find opportunities in terms of maintenance of existing assets, a new report states.
In its latest forecast, BIS Shrapnel says it expects the overall level of activity on maintenance spending to increase from around $38 billion in 2016 to almost $45 billion by 2021.
BIS senior researcher Adrian Hart says that whilst current levels of maintenance are being held back by a restrictive approach toward expenditure, stronger activity going forward will be driven by improving profitability and a growing backlog of work which has arisen out of restrictive spending practices within the maintenance area and a higher asset base which needs to be maintained arising out of strong levels of construction over the past decade.
“There are two key drivers for the recovery and boom in maintenance work,” Hart said.
“Firstly, critical maintenance cannot be deferred indefinitely, and our research suggests that a significant backlog in maintenance work may be building up in key sectors across transport, mining, utilities and non-residential building. At some stage maintenance will need to rise to avoid critical asset failures or even more costly asset replacement.
“Secondly, the main trigger for the recovery will be rising revenues and profitability for asset owners (including governments who own assets across transport, utilities and non-residential building) which will provide the financial wherewithal to undertake the work.”
BIS says mining will be the biggest area of growth, followed by transport and non-residential building.
Growth in mining will be driven by pent-up demand and the need to maintain a much stronger asset base as well as demand to maintain a whole new asset class in terms of newly completed LNG facilities.
Growth in roads, meanwhile, will be driven by years of high investment, growing traffic congestion and some road life cycles nearing their en. More modest growth in non-residential building will occur in hotels, hospitals and education facilities.
Despite being optimistic about the outlook overall, however, BIS does acknowledge a downside risk in that activity may be constrained by inadequate funding despite the need for work to occur and assets to be maintained.
It says there have been numerous examples of assets not being maintained across various sectors because funding was not there, and encourages asset owners not to fall into the trap of a ‘false economy’ whereby the long-term condition and longevity of assets was compromised because of inadequate levels of maintenance effort.