2022
9
UK Utility Capital Expenditure Market Report 2022
2021-12-16T03:10:49+00:00
OX1048601
1495
146308
[{"name":"Utilities and Energy","url":"https:\/\/store.mintel.com\/industries\/business-industrial\/utilities-energy"}]
Report
en_GB
“Infrastructure investment will continue to be a key focus across the utility sectors, driven by the need to replace old assets, boost resilience, deliver an environmentally sustainable network and supporting…

UK Utility Capital Expenditure Market Report 2022

£ 1,495 (Excl.Tax)

Description

The UK Utility Capital Expenditure report identifies consumer attitudes towards capital spending, utility network operators, and key drivers and challenges in the UK. This market report covers the market size, market forecast, market segmentation and industry trends for the Utility Capital Expenditure market in the UK. 

Current Market Landscape

For the current spending period (AMP7 2020-25), Ofwat provided a record £51 billion funding package for water companies in England and Wales. In May 2021, the industry regulator announced an additional funding package of £2.8 billion of environmental investment, after encouraging water companies to accelerate investment and bring forward new proposals to help power the UK’s green economic recovery from COVID-19.

  • Gross capital expenditure across the water and sewerage industry was recorded at £5.44 billion, down from £6.3 billion in 2020.
  • Total water supply is forecast to decrease by 7% by 2045, as a result of the climate emergency and limits to sustainable abstraction.
  • It has been estimated that only 0.2% of sewers and 0.6% of water mains are replaced annually.

The disruption caused by COVID-19 resulted in the delay of a number of capital projects across the utilities sector. Contractors’ profits for the year were also hit by site closures, lower productivity, additional operating costs and contract re-assessments.

Future Market Trends in Utility Capital Expenditure 

Utility network operators are facing heightened cost and efficiency pressures from industry regulators, which they need to pass onto the supply chain. This is resulting in some contractors being squeezed out of the market. For example, Balfour Beatty confirmed in August 2020 that it is withdrawing from the gas and water sectors and more contractors could follow suit.

Infrastructure investment will continue to be a key focus across the utilities sector, driven by the need to replace old assets, boost resilience, deliver an environmentally sustainable network and supporting the transition to Net Zero. The stronger focus on collaboration, technology and innovation should enable utilities and their supply chains to deliver future capital projects in the most efficient way

Read on to discover more details or take a look at all of our UK Finance market research.

Quickly understand

  • The impact of COVID-19 on capital spending across the utilities sector
  • How utility network operators will play a key role in powering the UK’s green economic recovery and support the transition to Net Zero
  • Key drivers and challenges that are set to shape utility capital expenditure over the coming years
  • Capital spending over the latest spending periods across the individual sectors

Covered in this report

Sectors: Water and sewerage, electricity transmission and distribution, gas transmission and distribution.

Brands: Anglian, Dwr Cymru, Northumbrian, Severn Trent, South West, Southern, Thames, United Utilities, Wessex, Yorkshire, Balfour Beatty, Costain Group, J Murphy & Sons, Kier Group, Laing O’Rourke, Morrison Water Services, Morrison Energy Services.

Expert analysis from a specialist in the field

This report, written by Claudia Preedy, a leading analyst in the B2B sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Infrastructure investment will continue to be a key focus across the utility sectors, driven by the need to replace old assets, boost resilience, deliver an environmentally sustainable network and supporting the transition to Net Zero. In response to COVID-19, the government and regulators have also encouraged companies to accelerate investment to help power the UK’s green economic recovery.
However, operators are facing increased pressure to deliver capital investments at the lowest cost to consumers. These increased cost and efficiency pressures are set to be passed onto the supply chain.
Building close relationships, collaboration, technology and innovation will play a key role in enabling utilities and their supply chain to deliver future capital projects in the most efficient way.
Claudia Preedy
Senior B2B Analyst

Table of Contents

  1. Overview

      • Key issues covered in this Report
        • COVID-19: market context
          • Economic and other assumptions
            • Covered in this Report
              • Water & sewerage
                • Electricity Transmission
                  • Electricity Distribution
                    • Gas Transmission
                    • Executive Summary

                        • Utility network players to play important role in powering green economic recovery from COVID-19
                          • Figure 1: Short-, medium- and long-term impact of COVID-19 on utility capital expenditure, 2020-25
                        • Capital expenditure in water and sewerage sector
                          • Delivery of capital projects disrupted by COVID-19
                            • Figure 2: UK capital expenditure on water and sewerage services, 2018-21
                          • Water companies to spend a record £51 billion in AMP7 (2020-25)
                            • Water sector to invest £2.8 billion in environmental projects to help green recovery from COVID-19
                              • Capital expenditure in electricity distribution sector
                                • Capital investment in distribution networks oscillates around £3.3 billion per annum
                                  • Figure 3: UK gross capital expenditure by electricity distribution network operators, 2017-21
                                • Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
                                  • Capital expenditure in gas transmission and distribution sector
                                    • Capital spending levels off towards the end of spending period
                                        • Figure 4: Total gas transmission and distribution capital expenditure, 2017-21
                                      • Managing uncertainty in RIIO-2
                                        • Companies and brands
                                          • Utility operators are adopting a more collaborative approach and closer relationships with the supply chain
                                            • But increased cost pressures are leading to strained relationships between utility companies and contractors
                                            • Issues and Insights

                                              • Water companies bring forward investment to support green economic recovery
                                                • Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
                                                • Impact of COVID-19 on Utility Capital Expenditure

                                                    • Figure 5: Short-, medium- and long-term impact of COVID-19 on utility capital expenditure, 2020-25
                                                • Water and Sewerage Industry Capital Expenditure

                                                  • Move towards totex in AMP6 and beyond reduces potential bias towards capital solutions
                                                    • Move towards long-term alliances and frameworks across industry
                                                      • COVID-19-related disruption to water industry capital programmes
                                                          • Figure 6: UK capital expenditure on water and sewerage services, 2018-21
                                                        • Sewerage-related capital expenditure
                                                          • Figure 7: Analysis of sewerage-related capital expenditure, by water and sewerage companies in England and Wales, 2018-21
                                                        • Water-related capital expenditure
                                                          • Figure 8: Analysis of water-related capital expenditure in England and Wales, by water and sewerage companies, 2018-21
                                                        • Scottish Water capital expenditure
                                                            • Figure 9: Analysis of Scottish Water capital expenditure on water and sewerage services, 2017-21
                                                          • Northern Ireland capital expenditure
                                                            • Figure 10: Analysis of Northern Ireland Water capital expenditure on water and sewerage services, 2017-21
                                                        • Water and Sewerage Future Capital Investment

                                                          • Key challenges facing the water and sewerage sector to 2050
                                                            • Climate emergency
                                                              • Population growth
                                                                • Figure 11: Population projections for England, by region, 2018-41
                                                              • Asset health and skills
                                                                • Improving the environment
                                                                  • Consumer and community expectations
                                                                    • Thames Tideway Tunnel
                                                                        • Figure 12: Estimated cost of Thames Tideway Tunnel, 2018-26
                                                                      • Water companies to spend a record £51 billion in AMP7 (2020-25)
                                                                          • Figure 13: Infrastructure investment pipeline by water and sewerage companies, 2022-25
                                                                        • Water sector to invest £2.8 billion in environmental projects to help green recovery from COVID-19
                                                                          • Environment Act places duty on water companies to reduce storm overflows
                                                                            • Increased cost pressures AMP7 is leading to strained relationships between water companies and contractors
                                                                            • Water and Sewerage Industry Legislative and Regulatory Environment

                                                                              • Industry regulation
                                                                                • Legislative environment
                                                                                  • Implications of Brexit on the UK water and sewerage sector
                                                                                    • Environment Act 2021
                                                                                    • Electricity Distribution Capital Expenditure

                                                                                      • Introduction
                                                                                        • RIIO model adopted for current price control period (2015-23)
                                                                                            • Figure 14: Total expenditure versus allowance, by DNO, 2016-20
                                                                                            • Figure 15: Total expenditure by electricity distribution network operators in Great Britain, by type, 2016-20 cumulative total
                                                                                          • Little change in annual capital spending levels
                                                                                            • Figure 16: UK gross capital expenditure by electricity distribution network operators, 2017-21
                                                                                            • Figure 17: UK gross capital expenditure by electricity distribution network operators, 2017-21
                                                                                            • Figure 18: UK gross capital expenditure by the electricity distribution network operators, by company, 2017-21
                                                                                        • Electricity Distribution Future Capital Expenditure

                                                                                          • Forecast total expenditure in RIIO-ED1 (2015-23)
                                                                                            • Figure 19: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
                                                                                          • DNOs bring forward investment to drive green recovery
                                                                                            • Impact of decarbonisation, decentralisation and digitisation on distribution networks to shape investment in the next price control period RIIO-ED2
                                                                                            • Electricity Transmission Capital Expenditure

                                                                                              • Overview
                                                                                                  • Figure 20: Size of electricity transmission network in Great Britain, 2021
                                                                                                  • Figure 21: Capital expenditure by the electricity transmission industry in Great Britain, 2017-21
                                                                                                  • Figure 22: Capital expenditure by the electricity transmission industry in Great Britain, 2017-21
                                                                                                • Capital spending during RIIO-T1 2013-21
                                                                                                    • Figure 23: NGET annual capital expenditure in RIIO-T1, 2014-21
                                                                                                    • Figure 24: SHET annual capital expenditure, 2014-21
                                                                                                    • Figure 25: SPTL annual capital expenditure, 2014-21
                                                                                                • Electricity Transmission Future Capital Expenditure

                                                                                                  • Enabling energy transition remains a key focus in current price control period (RIIO-T2 2021-26)
                                                                                                      • Figure 26: Summary of baseline totex for RIIO-ET2, by operator (£ million at 2018/19 prices)
                                                                                                  • Gas Distribution and Transmission Capital Expenditure

                                                                                                    • RIIO model adopted for last price control period
                                                                                                      • Capital spending levels off during the latter part of the spending period
                                                                                                        • Figure 27: Total gas transmission and distribution capital expenditure, 2017-21
                                                                                                      • Transmission network expenditure
                                                                                                        • Figure 28: Total gas transmission capital expenditure, 2017-21
                                                                                                      • Distribution network expenditure
                                                                                                        • Figure 29: Total gas distribution capital expenditure, 2017-21
                                                                                                        • Figure 30: Annual capital expenditure under RIIO-GD1, by GDN, 2013/14-2020/21
                                                                                                      • Iron Mains Replacement Programme dominates replacement expenditure
                                                                                                          • Figure 31: Length of iron gas mains replaced, by distribution network operator, 2015-20
                                                                                                      • Gas Future Capital Expenditure

                                                                                                        • Network operators to face tougher price controls from 2021
                                                                                                            • Figure 32: Summary of baseline totex for RIIO-GD2 and RIIO-GT2, by operator (£ million at 2018/19 prices)
                                                                                                          • Managing uncertainty in RIIO-2
                                                                                                            • Gas networks and the net zero challenge
                                                                                                            • Drivers for Investment in Electricity & Gas Distribution and Transmission Infrastructure

                                                                                                              • Decarbonisation of UK energy system
                                                                                                                • Government sets out headline commitments to help progress towards Net Zero
                                                                                                                  • Ambition to achieve net zero emissions by 2050 will push up electricity demand
                                                                                                                    • Change in energy mix is a key driver for investment in electricity transmission network
                                                                                                                      • Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
                                                                                                                        • Ofgem-supported innovation schemes to drive smart grid development
                                                                                                                          • Ofgem introduces Strategic Innovation Fund for RIIO-2, a new approach to funding network innovation across the electricity and gas networks
                                                                                                                            • Rise in distributed generation requires more active management of distribution network
                                                                                                                              • Renewables capacity development pipeline
                                                                                                                                • Figure 33: Renewable energy projects in pipeline, by technology, as of June 2021
                                                                                                                              • Energy storage to play key role in transition to clean electricity supply system
                                                                                                                                • Smart charging and vehicle-to-grid technology will play an important role in the future energy system
                                                                                                                                • Competitive Strategies

                                                                                                                                  • Balfour Beatty has simplified and refocused operations through its Build to Last programme
                                                                                                                                    • Costain adopts “leading edge” strategy to transition to higher margin services
                                                                                                                                      • Kier simplifies portfolio of business
                                                                                                                                        • Laing O’Rourke’s mission is to become the recognised leader for innovation and excellence in the construction sector
                                                                                                                                        • Company Profiles

                                                                                                                                          • Industry Structure
                                                                                                                                            • Balfour Beatty
                                                                                                                                              • Balfour Beatty has simplified and refocused operations through its Build to Last programme
                                                                                                                                                • Balfour Beatty withdraws from water and gas sectors
                                                                                                                                                  • Balfour Beatty order book boosted by HS2 contract
                                                                                                                                                    • Financial performance
                                                                                                                                                      • Figure 34: Financial analysis of Balfour Beatty, 2016-20
                                                                                                                                                      • Figure 35: Turnover analysis of Balfour Beatty, by segment, 2018-20
                                                                                                                                                    • Costain Group
                                                                                                                                                      • “Leading Edge” strategy
                                                                                                                                                        • Financial performance and outlook
                                                                                                                                                            • Figure 36: Financial analysis of Costain Group, 2016-20
                                                                                                                                                            • Figure 37: Turnover analysis of Costain Group, by segment, 2018-20
                                                                                                                                                          • J Murphy & Sons
                                                                                                                                                            • Group strategy
                                                                                                                                                              • Financial performance
                                                                                                                                                                • Figure 38: Financial analysis of J Murphy & Sons, 2016-20
                                                                                                                                                              • Kier Group
                                                                                                                                                                • Strategic Review 2019
                                                                                                                                                                  • Financial performance and outlook
                                                                                                                                                                    • Figure 39: Financial analysis of Kier Group, 2017-21
                                                                                                                                                                  • Laing O’Rourke
                                                                                                                                                                    • Deliver 2025 mission
                                                                                                                                                                        • Figure 40: Financial analysis of Laing O’Rourke, 2017-21
                                                                                                                                                                      • Morrison Water Services and Morrison Energy Services (formerly Morrison Utility Services)
                                                                                                                                                                        • Company performance
                                                                                                                                                                          • Figure 41: Financial analysis of Morrison Utility Services, 2016-20
                                                                                                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                          • Abbreviations
                                                                                                                                                                            • Methodology
                                                                                                                                                                            • Further Sources and Contacts

                                                                                                                                                                              • Trade associations and regulatory bodies
                                                                                                                                                                                • Trade magazines
                                                                                                                                                                                  • The Engineer
                                                                                                                                                                                    • European Process Engineer
                                                                                                                                                                                      • Plant and Works Engineering
                                                                                                                                                                                        • Utility Week
                                                                                                                                                                                          • Trade events
                                                                                                                                                                                            • Offshore Europe
                                                                                                                                                                                              • RWM Expo
                                                                                                                                                                                                • Utility Week Live 2022
                                                                                                                                                                                                  • WWT Wastewater 2022

                                                                                                                                                                                                  About the report

                                                                                                                                                                                                  This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

                                                                                                                                                                                                  Market

                                                                                                                                                                                                  Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

                                                                                                                                                                                                  Consumer

                                                                                                                                                                                                  Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

                                                                                                                                                                                                  Brand/Company

                                                                                                                                                                                                  Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

                                                                                                                                                                                                  Data

                                                                                                                                                                                                  Market reports provide appendices of data to support the research and insight produced. Our databooks* are easily manipulated and downloadable to support your research needs and covers factors from consumer attitudes to market forecasts.

                                                                                                                                                                                                  *databooks not available with UK B2B Industry reports.

                                                                                                                                                                                                  Below is a sample report, understand what you are buying.

                                                                                                                                                                                                  Click to show report
                                                                                                                                                                                                  2024 Sample Consumer Cover

                                                                                                                                                                                                  Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted. Our reports are available to download in PDF and PPT formats.

                                                                                                                                                                                                  Trusted by companies. Big and small.

                                                                                                                                                                                                  Want to speak to us directly?

                                                                                                                                                                                                  Contact us with your enquiry and our expert global team can help.

                                                                                                                                                                                                  Get in touch