Previously run as state controlled monopolies, the utilities market has been progressively opened to the forces of private competition over the last 25 years. However, significant regional differences exist between sectors regarding the “openness” of the respective markets.

Utilities construction output in 2009 reached £3.65bn however this represents 4% decline on the previous year, affected mainly by the reduction experience in electrical output. The chart, left, illustrates our estimates of market performance from 2004 with current forecasts of anticipated performance through to 2014.

The good growth in 2008 was followed by a market adjustment in 2009 but still resulting in output levels for 2009 being 7% ahead of 2007.

A key feature of the utilities market is the longer-term, larger-scale projects that are let over a number of years which tend to have a smoothing effect on construction output for the utilities market. The water sector in particular is characterised by 5 year Asset Management Programmes (AMP) with levels of capital investment for these programmes determined by the water regulator.

In 2009, the water sector accounted for 51% of utilities construction output in Great Britain, with output having been underpinned by the end of the AMP 4 programme. The continued focus of the regulator on improved customer service and water quality initiatives in recent years has resulted in greater capital spending programmes on improvements to mains and also water and sewage treatment plants. The structure of the water sector is not uniform with greater levels of private company involvement in England and Wales compared with Scotland and Northern Ireland.

The electricity market Great Britain has been subject to private sector competition for a longer period than that in Northern Ireland, which has only experienced significant loosening of State involvement over the last 5-6 years. The scale of large power station projects and larger renewables commissioning has meant that construction output for the electricity sector has been more volatile than for water in recent years with electrical construction output peaking at £1bn in 2007-08 before declining to £896m in 2009.

Prospects for utilities construction remain relatively optimistic with construction output expected to experience moderate-good annual gains to 2014 when the market is expected to reach £4.4bn. Key to this progressive growth is likely to be the long-term capital investment programmes of key sectors and also growth in the electricity sector boosted by new nuclear build programmes and expected increases in renewable energy production capacities.