The Group's strategic focus is to build on our UK market share from construction activities, to enter new market sectors and to widen our geographical spread into Europe and beyond.
In 2016 (calendar year), the UK constructional steelwork market, as measured by the British Constructional Steelwork Association ('BCSA'), is estimated to have increased 4 per cent to 902,000 tonnes (this equates to a market of approximately £1.7 billion). This increase in demand followed an 8 per cent rise in structural steelwork consumption in 2015.
The Group's potential production capability is approximately 150,000 tonnes, which represents c.17 per cent of 2016 UK structural steel production. Its current share of the market is approximately 90,000 tonnes (2015: 85,000 tonnes), resulting in a total UK market share for 2016 of c.10 per cent (2015: c. 9 per cent).
The Group's market share has increased during the year which reflects the projects in an order book which reached a six-year high during 2017 and an improved UK market position. The increase in market share has been achieved in accordance with our strict risk mitigation criteria, which includes the ability to decline work where the pricing is not considered economic, where terms and conditions are unacceptable to us or where there is insufficient allowance for risk.
The market sectors targeted by the Group, and their estimated size in tonnes during 2016, are shown below:
Total market tonnage 2016:
|Industrial and distribution||48%||431,000|
|Infrastructure (including bridges)||7%||64,000|
|Health and education||12%||111,000|
|Power and energy||7%||59,000|
|Stadia and leisure||3%||28,000|
Market conditions have remained stable during the year. Although pricing remains competitive, customers are also placing a high premium on quality of service, project delivery and financial (balance sheet) resilience, all areas of strength for the Group. We continue to seek opportunities with clients who recognise the additional value that we bring to the outcome of a project.
After a period of recent strong growth, the market forecast, prepared by the BCSA, is estimated to level out over the next two years before returning to growth again as major infrastructure projects start to move into their delivery phase. These include Hinkley Point Nuclear Power Station, HS2 and the expansion of Heathrow Airport. Our dedicated bridge team and our historical record in transport infrastructure, both railway and airports, should enable us to feel confident about our involvement in these projects. The mix of projects within market sectors will be a key determinant of the Group's outlook. Larger, more complex projects will continue to offer strong opportunities and the Group continues to focus on operating efficiencies to address smaller projects competitively.
UK order book
The Group has a very healthy, well-diversified order book of £229m (June 2017) which represents approximately eight months of forward production capacity.
The order book has decreased since November 2016, which represented the Group's highest position for over six years. This decrease, which was expected, represents the return to more 'normal' order book levels following the awards earlier in the year of certain large contracts, including 22 Bishopsgate.
The contract mix within the order book incorporates a diverse range of projects in commercial offices, industrial, leisure and infrastructure projects. Many of these projects play to our key competencies – large complex projects that require high quality, rapid throughput, on-time performance and full co-ordination between stakeholders.
The Group continues to monitor the future pipeline of projects currently being tendered. This provides forward visibility of future orders and helps to facilitate production planning. The Group's current pipeline of contract opportunities is encouraging and includes a range of projects in the commercial office, industrial and distribution, transport and power and energy sectors.
Group potential capacity
Total UK production of structural steelwork