Major contractors going cool on road maintenance market
The Enquirer understands that a number of Tier 1 contractors are looking to work-out existing maintenance deals but not bid any new work as they focus purely on capital projects.
The move comes as Highways England continues to take more decisions in-house under its asset delivery model.
Highways England staff are taking a growing number of decisions over maintenance spending and are looking to engage more directly with Tier 2 and 3 contractors further down the supply chain.
Big name firms fear further erosion of maintenance margins and are looking to focus their resources elsewhere.
One industry source said: “Big players see their margins being eroded here and are focusing on more profitable new infrastructure projects.
“I’m sure you’ll see some big names pulling out of the market in the near future.
“And Highways England won’t just be able to start talking to the Tier 2s and 3s like they do to the Tier 1s at the moment.
“The real construction world just isn’t like that.”
The first area contract under the asset delivery model was awarded by Highways England in 2016.
Maintenance deals across the country are currently operated by Amey, Ringway, Kier and Costain Jacobs with the remaining six areas due to be introduced on a rolling programme until 2022.
Another industry source said: “Maintenance is definitely seen as a tough area to make a decent return.
“We have all seen how the world is changing for major contractors and their business model will be to focus on higher return sectors.
“Highways England will have to realise that contractors – whatever level in the supply chain – need to make a sustainable margin going forward.”