The engineering sector in Australia is facing turbulent times on a number of fronts amid not only the transition away from resource sector work but also political developments impacting the immediate future of public sector infrastructure projects.
As is well known, the sector is facing a broad general transition as resource related work winds back. Already, the impact of this is becoming apparent.
Both Worley Parsons and construction and engineering outfit McMahon slashed around 4,000 jobs each throughout calendar 2014 – the latter being forced into a significant write-down which saw it lose more than $110 million in the second half of last year.
In its latest profit result, meanwhile, Monadelphous saw a 30 per cent cut in first half profit, a significant reduction in margins. Despite having registered a shortfall of the magnitude of several thousand over recent years, employment services firm Clarius now reckons the nation has a glut of 4,100 engineers.
More appears yet to come. In a recent report, ANZ suggested annual levels of investment in projects worth more than $100 million would fall from $88 million in 2014 to $32 million by 2017. Meanwhile, ABS estimated the value of private sector work on civil engineering projects as at September 2014 ($101.1 billion) to be down on that in the same period two years earlier by 38.64 per cent.
Against this, work on public sector infrastructure developments is ramping up, especially in New South Wales. Building sector forecaster Australian Construction Industry Forum reckons the dollar value of work done on construction of roads will rise from annual levels of just over $1.5 billion in 2013/14 to more than $2 billion by 2016/17 – though this forecast was made before the cancellation of the East West Link project in Victoria.
Because of this, the types of work in demand have shifted. In its most recent quarterly report on the engineering sector, for instance, recruitment outfit Hays said ‘hot jobs’ in demand include Revit drafters and modellers, structural engineers, tunnelling engineers and drafters (for road and rail projects in Sydney and Melbourne), civil designers (to design roads) and traffic and transport engineers. While most of the action is taking place in New South Wales, some demand for project managers and hydraulic professionals amongst others is starting to emerge in South Australia.
Much of that, however, depends on political developments. On this score, events of late have been mixed, with the partial privatisation of electricity assets to pay for road and rail projects now looking likely to go ahead in New South Wales following the Liberal Party win in that state but considerable levels of disappointment reining in Victoria over the cancellation of the East West Link Project and significant levels of uncertainty over the future of the newly elected government in Queensland, which in any rate is yet to reveal its infrastructure plans or programs.
Outside of infrastructure, opportunities for work in commercial building will most likely pick up in 2015/16 after dropping back in 2014/15, with BIS Shrapnel forecasting the dollar value of commencements to rise in places such as New South Wales, South Australia, Tasmania and the Australian Capital Territory. Meanwhile, approval data suggests conditions in the apartment sector in New South Wales and Victoria remain red hot for now despite expectations that activity will eventually ease back in this sector.
With all this in mind, a big picture emerges of a structural shift in the market away from mining and toward opportunities in building and infrastructure, albeit with uncertainty reining over the extent of this infrastructure program, especially in Queensland.
Key states and sectors:
- While activity is dropping back in Western Australia, New South Wales remains the state of opportunity, with work on multi-residential, commercial and civil projects all running hot. South Australia is also lifting and Tasmania is lifting a bit amid opportunities on the Royal Hobart Hospital and a pick-up in residential building in that state.
- In terms of sectors, transport is a big area of opportunity as is work on the National Broadband Network roll-out as well as commercial building opportunities in areas such as retail, warehouses, hotels and accommodation and retirement living. While work on multi-residential facilities is expected to wind back, recent approval data suggests activity in this area will remain strong for now.
- According to Hays, key jobs in demand include Revit drafters and modellers, structural engineers, tunnelling engineers and drafters, civil designers, project managers, hydraulic professionals and traffic and transport engineers.