Construction Equipment Capital Investment Incentive Programme – Building our Way Back to Health

The economy’s recovery from the effects of COVID-19 is facing a vastly different economic landscape. The CEA is calling for a Capital Investment Incentive Programme to stimulate the economy, delivered thorough a green led, technology driven pipeline of infrastructure, civil and domestic construction, boosting productivity, manufacturing, construction and capital expenditure.

Desirable outcomes of a Capital Investment Incentive Programme are:

  • Retain / Increase Jobs
  • Environmental Benefits working towards Net Zero
  • Digital Productivity Boost
  • Levelling Up the Economy

 

Construction Equipment manufacturers continue to drive down the NOx and particulate emissions of Non-Road Mobile Machinery (NRMM) and continue working toward Net Zero through digital manufacturing and world class innovation. Coupled with the proposed fast tracking of infrastructure, the Chancellor’s Project Speed will expedite the Prime Ministers “Building our way Back to Health” initiative. The UK construction equipment sector is a technology adoption escalator, driving productivity growth and lowering environmental impact.

The £13 billion UK construction equipment sector stands ready to build production capacity to compete in the global marketplace. But, the sector has been hit hard by COVID-19. Productivity improvements and sustained orders will require collaboration between OEMs, end users and government.

Therefore the CEA believes that there is now a very strong case for the introduction of a NRMM / Construction Equipment Capital Investment Incentive Programme. NRMM has been excluded from any of the Department of Transport’s previous £2.5 billion Automotive Sector Scrappage Schemes. Nor can NRMM benefit from the current GLA scrappage scheme for polluting vans and goods vehicles operating in London.

The UK construction equipment sector produced over 60,000 units in 2018. (Source: BEIS sponsored 2019 Sector Study). Of the machines sold in the UK, 60% were sold to plant hire companies. Another 10% were sold to contractors. Post COVID-19, most plant hire companies are slashing Capex budgets for new equipment by up to two thirds. Meaning hire fleets will continue to operate with older, less efficient, higher emissions plant, rather than updating to newer lower emission machines. The CEA estimates that the UK’s total machine park for NRMM is C. 250,000 machines. Approximately 10% of these machines will be Stage IIIA engine or older.

SME contractors are equally financially challenged on the ongoing COVID-19 pandemic, leaving them unable to upgrade their fleet to meet operating standards on Low Emissions Zone (LEZ) sites. SME contractors are facing the additional conundrum of increased costs of financing coupled with a reduction in lines of credit. Thus excluding them from tendering for work on HS2, GLA, TfL and other major infrastructure projects, despite these projects tender rules requiring SME sub-contractors be part of the contractor mix. From September 2020 the minimum standards in GLA projects inside the Central Zone rise to Stage IV compliant, with the rest of London rising to Stage IIIB compliant – requiring significant, and largely unavailable, CapEx from SMEs to upgrade their fleets.

Note: Manufacturers investing in R&D resulted in Stage IV NOx emissions being reduced by over 95% and particulate mass emissions being reduced by over 97% (compared to Stage I limits). The law now requires that Stage V engines are used for new machinery and these will reduce emissions even further, with particulate mass emissions being reduced by over 98% and an all-new particulate number limit being introduced. Coupled with alternative fuels such as hydrogen, electric and hybrid, new construction equipment is equipped to operate on even the most stringent Low Emissions Zone (LEZ) job sites.

Levelling Up – The majority of NRMM manufacturers in the UK are based in the North of England and the Midlands. Coupled with the significant number of regionally based infrastructure pipeline projects, supporting the UK construction equipment sector will facilitate substantial levelling up.

UK Construction / Construction Equipment Sector, Economic Reach. The economic multiplier of the combined UK construction sector is a return of £3 for every £1 spent. A scrappage scheme would benefit not only the OEMs (original equipment manufacturers), but the manufacturing supply chain, aftermarket and attachments, end users, contractors and the £4 billion plant hire sector. The UK construction equipment sector, valued at £13 billion pa to UK Plc employing over 44,000 workers (BEIS sponsored sector study 2019) and forms part of the wider UK construction sector. The sector, valued at over £117 billion in 2018 million, represents over 6% of GDP, employing over 2.4 million workers – 6.6% of all jobs (source: House of Commons Library briefing paper 01432, 16 December 2019). The Construction Products / Materials sector adds a further £61 billion P/A and employs over 373,000 (source: CPA)

NRMM / Construction Equipment Capital Investment Incentive Programme outcomes:

  • Stage V NRMM (Non Road Mobile Machinery) NOx emissions reduced by 95.7%, particulate mass emissions reduced by 98.2% and particulate number being limited for the first time, relative to some older equipment currently in use in the UK.
  • Higher specification plant using less fuel, more efficiently.
  • SME contractors able to upgrade the fleet, allowing opportunities to tender for HS2 / GLA / TfL projects.
  • Access to finance for higher cost electric or hydrogen fuelled plant for use in urban environment.
  • Drive manufacturers to invest in R&D, increasing productivity and developing digital manufacturing technologies.
  • Greening of production leading to lower / zero emissions in factories.
  • Protect / create jobs.
  • Older, higher emission plant removed from the national machine park to be exported or remanufactured/recycled – circular manufacturing.

 

Joanna Oliver MBE, CEA Director of Global Programmes and Dale Camsell, CEA Senior technical Consultant.