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Industry predictions: Engineering, Construction and Infrastructure

2019 will see a digital leap forward as many construction companies explore implementing integrated business software into projects for the very first time.

Tighter margins, global skills shortages and new industry entrants are all ramping up the pressure on traditional construction businesses to deliver greater productivity and more integrated, cost-efficient projects, on time, every time.

1. Prediction

50% of all construction projects worldwide will include modular content by 2022, driven by the growing global skills shortage.

In March 2018, a new factory opened outside Liverpool, England employing 150 people 24 hours a day. What does it manufacture? Homes—starting with a first order of 81 homes and 58 apartments, as part of a first-year target of 450 homes. And it’s just one among many. At IFS, in 2018 we had four times greater customer activity around modular construction than in any previous year.

From schools in Ireland to prisons and hospitals in the United States; from sustainable luxury apartments to vast workers’ dormitories, 2018 has seen modular construction go well beyond hype. In 2019 it will get even stronger, with housing shortages a key driver. The UN estimates that over 2 billion new homes will need to be built over the next two years. Modular manufacturing enables affordable houses to be built faster and at higher volume. Driven by a worldwide shortage in skills and housing, increased modular construction will impact the construction industry massively in 2019.

New entrants will make agility even more essential.

For a start, we’re already seeing a wave of new entrants coming into the industry. Take that modular housing factory in Liverpool. Neither of the two founders came from the construction industry. One, Luke Barnes, was a design engineer, his partner a software engineer. Barnes told reporters: “I found there was a big gap in the market as there were no constructors that offered the quality, deliverability and competitive pricing I was searching for.”

2019 will see growing numbers of traditional construction companies begin opening modular factories to stay competitive. And more new players enter the industry—from manufacturing, supply chain and logistics, to local governments, banks and insurance companies. Many will be able to offer flexible finance and service packages too.

The pressure on incumbent building firms to adapt will be huge. They’ll need tighter control and more adaptability over every aspect of their projects. Proving they can, if necessary, partner up with larger networks of suppliers, offer services and maintenance on assets once built, include equipment hire, and yes, even offer or manufacture some modular units or components. It all adds up to an urgent need for better, more integrated digital management of complex, demanding projects. That need is driving my second industry prediction.

2. Prediction

In 2019 more construction companies than ever before will start trying out integrated business software – for the very first time.

10% of traditional construction firms could go out of business over the next 5 years. Competition around delivery and productivity will be fierce. Many companies will find themselves balanced on a knife-edge of opportunity: On the one hand growing urban populations and housing shortages will mean more demand and higher order intake. On the other, shrinking profit margins and increased competition will mean unprecedented pressure on productivity and delivery.

As a result, 2019 will see more firms moving from being document-driven to data-driven. Many will take their first steps into digital and make their first investments in integrated business systems like Enterprise Resource Planning, or ERP. Two main drivers will turn integrated business systems like ERP from a nice-to-have into a need-to-have.

When less is more: Growing pressure on margins.

With profit margins as tight as they are, many construction firms feel as if the more business they bring in—the less money they make. A recent Deloitte report found that construction companies’ profit margins are under pressure in several European submarkets, with Western Europe particularly vulnerable. In the UK, Belgium, the Netherlands and Ireland profit margins are so narrow they may not even be offset by higher order intake. 31% of the UK’s largest contractors reported a fall in margins in November 2017, with the country’s largest 10 contractors having a negative average margin of -0.5%.

New entrants: China, Korea… and Amazon?

Global competition is growing powerfully, impacting European construction companies hard. The Engineering News Record’s Top 100 Global Contractors In for 2017 found that European firms made up only 23% of the world’s Top 100 Global Contractors in 2017.

In 2010, 44% had been European. Compare that to Asia, which rose from 41% in 2010 to 51% in 2017, and the big picture is clear. Most analysts predict that China, India and the US will all be winners in the forecasted 8 trillion USD growth expected in construction by 2030—but not Europe.

Companies like China Communications Construction, Hyundai Engineering & Construction and Samsung C&T represent a serious threat to large European incumbents. Taken by revenue alone, even by 2017 the Top Four and seven out of the world’s Top Ten largest construction companies were all Chinese.

With many able to offer highly competitive and flexible financing packages. As we’ve seen, the rise in modular is bringing in new entrants from the manufacturing, supply chain and software engineering sectors. And given all this, who knows, could even digital giants like Amazon or Uber one day see construction as a sector ripe for disruption? If so, who’d put money on the industry in its present state surviving the challenge?

The bottom line is that many construction companies are highly exposed. In 2018, we saw huge ongoing efforts to drive efficiencies, increase productivity and establish repeatable delivery. In 2019, the pressure will be even more intense. The need for adaptability has never been more urgent. 2019 will be the year when many companies finally start considering systems like ERP not as isolated back-office finance functions essential, joined-up systems that provide urgent coherence, speed and efficiency throughout a project or business. 2019 could be the year when construction takes a giant leap forward, embracing digital adoption.

3. Prediction

Digital asset life cycle management, integrating both BIM and ERP, will emerge as a future need-to-have.

The collapse of Carillion, one of the UK’s largest construction giants, sent shockwaves through the construction industry. The company built and maintained major assets such as schools, prisons, hospitals and power stations across the UK—before collapsing 1.7 billion euros in debt, overnight, in January 2018. While analysts have endlessly debated how and why, insiders point to many systemic faults.

Certainly, in a company that size, spread over that many projects, it seems fair to say that without a central, integrated business system it would be all too easy for senior management to get a full picture of the truth. For the truth to be hidden. And for projects to be kept separate and siloed, financially and operationally.

Central to ERP’s power for construction companies is its ability to connect and integrate all functions in a project—from finance to operations to design—enabling maximum adaptability. I’ve always argued that Building Information Modelling (BIM) will be a driver of digital asset life cycle management and integration. BIM is an integral part of moving from a document-driven to data-driven world. In 2019, I believe we’ll see the first construction companies take their first steps into discussing how to merge and build on the strengths of combining the two systems: BIM and ERP.

Many firms have now started to integrate BIM models into their business. But building BIM on its own without an integrated business system, is only a small part of the picture. As a business system, ERP takes all the functions of the business and provides it with one set of data, enabling it to flow through a project’s life cycle all the way from inception to disposal, and enabling any combination of service or asset management in between.

For manufacturers, integrating ERP as a whole business system, rather than a single financial tool, is old news. They’ve been successfully integrating CAD with ERP for years. However, for many companies in the construction industry, that journey remains to be made. But 2019 will see many taking their first, vital steps.

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Dyson invests in electric car market with £200million UK test track

Household appliance-maker Dyson has announced it is accelerating plans to develop electric cars in Britain – with a £200 million investment in track-testing facilities at its new UK research centre.

The firm, which is branching out from its vacuum cleaners and hair driers to take on car giants with a new generation of high-tech electric vehicles, said the move would create ‘more high-skilled jobs for Britain’.

It is being viewed as another vote of confidence in the United Kingdom in the run up to Brexit next Spring.

Dyson is currently recruiting an additional 300 automotive engineers on top of the 400 already in place and has said the electric car project could see the firm’s present UK workforce nearly double to around 8,000.

The battery-powered electric cars are being designed and developed in the UK, however lower labour costs mean final assembly is likely to be in South East Asia where much of the firm’s wider electronic and hi-tech production already takes place.

Dyson confirmed it is seeking planning permission for ‘extensive vehicle testing facilities’ at the former World War 2 RAF base at Hullavington Airfield in Wiltshire – including ten miles of test track – as it embarks on the ‘next phase of electric vehicle development’.

The planning application for new second phase outlines 45,000 square metres of new development space to accommodate more than 2,000 people as well as a café, sports centre, recreation space and supporting technical facilities.

It will be accompanied by a £200 million investment for UK expansion.

The new 10-mile test track proposals includes a dynamic handling circuit to assess ride, steering and brakes, a vehicle stability dynamic platform for testing vehicle manoeuvrability and an off-road route for driving through soft and rugged terrains.

The proving ground will also have a hill and handling road route which simulates a challenging fast road with a range of corners and a section to test advanced driver assistance systems up to its maximum speed.

The premises will also have test slopes of differing gradients to check the powertrain of engines and gears.

As part of the £84 million first phase, Dyson has already converted two historic World War Two hangars into state-of-the-art engineering work spaces at the airfield.

They are home to 400 members of Dyson’s newly created automotive team who have now moved in, with a further three buildings on course for completion.

Founder Sir James Dyson announced in September last year that his firm had been working in secret over the previous three years on an electric vehicle which it intends now to put into production.

It is investing £2 billion in all ahead of the electric car’s launch in 2021.

Sir James said his aim was to ‘dominate’ the emerging electric car market by taking on America’s Tesla and traditional car makers like Jaguar Land Rover who are creating their own battery powered vehicles.

He stressed the new car would be ‘radical, upmarket, high-tech and cutting edge’, clarifying: ’It won’t be a Nissan Leaf.’

He added at the time: ’We will lead the development for high value jobs in the UK. These cars will be British exports. The know-how and development is here.’

A spokesman said: ’The project builds on Dyson’s existing expertise in solid state batteries, motors, vision systems, robotics, air conditioning and aerodynamics. It represents an ambitious project on tight timelines.’

Global technology company Dyson currently employs 4,800 people in the UK – a 2.5 times increase over the last five years.

It employs 12,000 globally – including 4,500 engineers and scientists – with engineering and testing operations in Malaysia, Singapore, the Philippines and the UK.

Dyson chief executive officer Jim Rowan said: ‘Our growing automotive team is now working from Dyson’s state-of-the-art hangars at Hullavington Airfield.

‘It will quickly become a world-class vehicle testing campus where we hope to invest £200m, creating more high-skilled jobs for Britain.

‘We are now firmly focused on the next stage of our automotive project strengthening our credentials as a global research and development organisation.’

Dyson’s wider interests include development of solid state battery cells, high-speed electric motors, vision systems, machine learning technologies, and Artificial Intelligence (AI).

The firm’s 67-acre campus in Malmesbury, Wiltshire, is also home to the Dyson Institute of Engineering and Technology, which opened in September 2017 and the firm is making a £31m investment into UK higher education with a funded four-year degree programme to help overcome the shortage of engineers in the UK.

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Google Doodle Honors British Engineer Hubert Cecil Booth

British engineer Hubert Cecil Booth, helped to revolutionise the way we clean our homes.

Celebrated in a Google Doodle on the 147th anniversary of his birth, Booth was the first to conceive a device that sucked up dirt instead of blowing it away.

A horse-drawn, petrol-powered machine too large to be used in buildings, his “Puffy Billy” looked little like the technology used on carpets in every household today.

But the way it operated was essentially the same as a modern vacuum cleaner.

Booth’s inspiration was an American inventor who demonstrated a device blowing dust off chairs at a theatre in London in 1901.

Booth later said he realised “if the system could be reversed, and a filter inserted between the suction apparatus and the outside air, whereby the dust would be retained in a receptacle, the real solution of the hygienic removal of dust would be obtained”.

He tested his theory by putting a handkerchief over his mouth and seeing how much dust he could suck up.

He found the technique worked – although what Booth’s dining companions thought of his behaviour is less clear – and the Puffing Billy was soon born.

Powered by an internal combustion engine, it used piston pumps and to draw air through flexible pipes fed through a building’s windows.

An electric-powered device soon followed, which Booth used to offer cleaning services to businesses through his British Vacuum Cleaner Company.

Despite drawing noise complaints, the machines received royal seal of approval and were enlisted to clean the carpets of Westminster Abbey before Edward VII’s coronation.

They were also used to clean naval barracks, as well as factories, theatres and shops.

The vacuum even led to Booth’s arrest after one of his inventions inadvertently sucked up silver dust from coins at the Royal Mint. However, he was soon released.

Booth later turned his focus to the domestic market after founding Goblin, a company which manufactured his vacuum cleaners for sale.

However, it was William Henry Hoover’s rival firm which would come to dominate that market and become synonymous with the modern-day vacuum.

New report says hydrogen can meet 18 per cent of energy demand by 2050

A new study has detailed how hydrogen energy can make up around one-fifth of the total energy mix by 2050, helping to keep global warming below two degrees Celsius.

The report was commissioned by the Hydrogen Council, a coalition formed earlier this year featuring the CEOs of automotive and energy giants including Shell, Air Liquide, General Motors, Statoil, BMW and Toyota. Entitled Hydrogen, Scaling up, it provides a roadmap for the expansion of the sector. By 2030, 10 to 15 million cars and 500,000 trucks could be hydrogen-powered. Overall, total demand could increase tenfold to almost 80EJ (around 22,000TWh) by 2050, according to the study.

Seven particular areas were identified by the council where hydrogen energy can play a key role:

– Enabling large-scale renewable energy integration and power generation
– Distributing energy across sectors and regions
– Acting as a buffer to increase energy system resilience
– Decarbonising transportation
– Decarbonising industrial energy use
– Helping to decarbonise building heat and power
– Providing clean feedstock for industry

“The world in the 21st century must transition to widespread low carbon energy use,” said Takeshi Uchiyamada, chairman of Toyota Motor Corporation and co-chair of the Hydrogen Council.

“Hydrogen is an indispensable resource to achieve this transition because it can be used to store and transport wind, solar and other renewable electricity to power transportation and many other things. The Council has identified seven roles for hydrogen, which is why we are encouraging governments and investors to give it a prominent role in their energy plans. The sooner we get the hydrogen economy going, the better, and we are all committed to making this a reality.”

Investment of between $20-25bn per year up until 2030 will be required to scale the industry to the level outlined in the report. However, it is pointed out that there is currently around US$1.7 trillion invested in energy each year, including $650bn in oil and gas. The report also claims that the hydrogen sector has the potential to develop $2.5 trillion of business, creating more than 30 million jobs by 2050.

By reaching 18 per cent of the energy mix mid-century, it is estimated that six gigatons of CO2 would be reduced each year compared to today’s levels. This would meet 20 per cent of the total reductions required in the 2050 two-degree scenario.

“This study confirms the place of hydrogen as a central pillar in the energy transition, and encourages us in our support of its large-scale deployment” said Benoît Potier, chairman and CEO of Air Liquide.

“Hydrogen will be an unavoidable enabler for the energy transition in certain sectors and geographies. The sooner we make this happen the sooner we will be able to enjoy the needed benefits of hydrogen at the service of our economies and our societies.”