The morning of Wednesday 28 April 2021 is a good time to speak to Rob Oliver, given that first-quarter UK construction and earthmoving equipment sales figures had been released to industry trade media the previous afternoon.
Sales were expected to show a big increase on the heavily COVID-19 pandemic disrupted same period of last year. As such, it was no surprise to see them rise 30% above Q1 2020 levels and reach over 8,000 units, according to the construction equipment statistics exchange run by Systematics International in partnership with the CEA.
As Oliver is quick to note, a better indicator of the strength of the UK construction and earthmoving equipment sector’s COVID-19 recovery is to compare Q1 2021 sales with sales in the first quarter of 2019. This shows that first-quarter 2021 sales were 2.9% above 2019 levels, suggesting market momentum in the early months of this year.
“We’re pretty encouraged by the new figures. There seems to be good steady demand, and we’ve come back quickly from the issues of last year,” Oliver summarises. “Even though sales dropped off a cliff early on [after the first UK-wide COVID-19 lockdown was announced on 23 March 2020], construction sites stayed open subject to abiding by pandemic-linked health and safety measures. It was good that the industry could keep operating for the main part of the year.”
The forerunner organisation of the CEA was formed in 1941 for British manufacturers of cranes and construction plant. It was supported by the wartime government keen to coordinate production in a time of restricted steel supplies.
For many years it was known as the Federation of Manufacturers of Construction Equipment & Cranes (FMCEC). With the demise of crane manufacture in the UK and more importers joining the trade association, the name was changed to the Construction Equipment Association in the early 2000s – and became a company limited by guarantee in 2003.
In 2000, CEA membership had shrunk to just over 50 members. Today, the association has more than 150, including original equipment manufacturers (OEMs) in the UK and overseas, component and accessory suppliers, and service providers.
Asked about CEA and CEA members’ priorities in 2021, Oliver says sustainability has become a huge issue in the UK construction equipment industry.
“Issues around greenhouse gases and carbon are all around us. We’ve got the COP26 conference in Glasgow in November, and it’s interesting that our government has made announcements on improving the targets they’d previously committed to. The Biden administration in America did the same thing at last week’s [22-23 April] climate summit of world leaders, where the Chinese and Russians were also around the table. That has to be encouraging.
“Sustainability is the dominant theme, and it’s a continuation of what our industry has been doing anyway. The work machine manufacturers have done over the past 15 years to meet European stage engine emissions requirements has been pretty impressive: NRMM [non-road mobile machinery] engine emission reductions since Stage 1 was introcuced [we are now on stage 5] are a 97% reduction of particulates, 96% reduction of nitrogen oxides and 85% reduction of hydrocarbons.
“In the last five to six years, we’ve started to see the introduction of electric-powered machines, particularly at the smaller model end. We’ve seen hybrid machines. Our members have a huge opportunity to contribute to driving this agenda forward.”
Oliver says that while he welcomes ambitious construction equipment sector sustainability targets, it is important for the government to work with companies to create a clear delivery plan.
“It’s one thing saying what your targets are for 2035 or 2050; it’s another laying out how you get to where you want to be. It’s always been a criticism of government. I heard on the radio this morning [28 April] they were talking about how the government seems to have sidelined the government strategy work it was doing under [former PM] Theresa May. Is there the right structure where government and business can get together to discuss what the realistic milestones are going to be as we go forward?”
Oliver, who has served more than 20 years as CEO of the CEA in its current and former FMCEC (Federation of Manufacturers of Construction Equipment & Cranes) form, says the association is a “very active” member of CECE (Committee for European Construction Equipment), the umbrella body for the European construction equipment manufacturers.
“CECE has just done an excellent piece of work on decarbonisation, and last week [w/b 19 April] Alan Tolley of JCB [group director of engines], who led the Committee’s working group of decarbonisation experts, presented a position paper to the CECE Steering Group. It was kind of an overview of what we’re doing on decarbonisation currently and what we may do in the future. It looked at what are the influences on making our products more environmentally friendly. It noted that it’s not just what fuel you use, like biofuel, electric or hydrogen.
“There’s also the efficiency of the machine itself. There have been great strides made on, for instance, the efficiency of diesel-powered machines. It’s also important to consider whether you have the right machine for the required application. Another important area the CECE work noted is whether the machine is being operated correctly, including the full efficient use of all its product-enhancing options. This kind of work gives greater clarity on what we need to do.”
Oliver thinks the CEA is “well placed” to play its part in futureproofing construction equipment sustainability. This includes what he says are good relations with the Climate Change Committee and DEFRA (Department for Environment, Food & Rural Affairs].
“We try to provide good, impartial expert advice on things. Not every business is going to move at the same pace. In the construction world, there are so many different elements to it. It’s a big undertaking to make everything as green as possible going forward.”
Britain’s 31 January 2020 departure from the EU following a narrow referendum victory for the Leave campaign on 23 June 2016 has seen CEA members going through what Oliver describes as a “bedding down of the post-Brexit world”.
“There are technical and regulatory challenges that are impeding them in doing their business,” he continues. “These are not necessarily game-changers, but we are doing a lot of work interpreting what companies should be doing regarding importing and exporting. We’re also trying to encourage the government to make things as clear as possible.
“How you trade in and out of Northern Ireland post-Brexit is a great mystery to many, but from our point of view, it’s important as we’ve got some very big crushing and screening manufacturer members there.”
Oliver says that Brexit has meant that some CEA member companies have had to carefully consider how they can continue to meet customer demand for replacement parts. “They had always been able to say, ‘We will get this part to you within 24 hours.’ But if they sensibly have a distribution hub in mainland Europe, some have started to have difficulty shipping those parts overnight and quickly to the UK due to the extra paperwork and costs involved. I’m not getting feedback that this is causing major problems, but it does affect service provision to the end-user.”
Coming out of an initial post-Brexit period of shadowing EU regulations will, says Oliver, be the next challenge for the UK construction equipment sector.
“The new UKCA (UK Conformity Assessed) marks will need to be applied to equipment as a requirement from 1st January 2022, and people will be thinking, ‘What does that mean?’ Equally, when equipment is shipped into Europe from the UK, it will also need to meet CE requirements.
“What our members would not look forward to in the medium- to long-term would be any major divergence in regulations between Britain and the EU. That could mean having to build and supply a machine that meets two very different sets of requirements.
“Even when you don’t radically change regulations, there can be differences in interpreting them. For example, when you’re shipping equipment into France, it can be different to shipping equipment into Germany. We had a small incident a couple of months ago when the French authorities were not accepting the previous licences for low loader wider loads. Operators were being asked to effectively apply for a new licence every time they wanted to move units. It was an issue that was eventually smoothed out and settled, but it’s an example of something that can happen which you didn’t expect to happen.”
The CEA welcomed the spring budget announcement on 3 March 2021. The UK Chancellor of the Exchequer Rishi Sunak pledged a £65 billion boost for COVID-hit businesses workers alongside a raft of new trade initiatives. The package included forming a UK Infrastructure Bank with an initial capitalisation of £12 billion, which Sunak hopes will stimulate investment of £40 billion. However, Oliver stresses that not everything that was announced by Sunak, whose Richmond, North Yorkshire constituency office is very close to the CEA’s Northallerton HQ, was as good for the UK construction equipment industry as first thought.
“Listening to the announcement, at one stage, I broke into a broad smile because when we put our submissions into the Treasury beforehand, we said one of the things you need to encourage is capital investment,” explains Oliver. “With the newer construction equipment now available to customers, if there was some further capital spending incentive then more of this equipment would be bought, which would speed up technological adoption by our marketplace, helping to build national infrastructure and give our members a more critical mass of machines in the market.”
Oliver said he was initially delighted when he heard the Chancellor announce a ‘Super Deduction’ for capital investment. “It meant that for every £100 firm’s spend, they would receive a tax credit of £130,” explains Oliver. “The Chancellor said, and I quote, ‘Under the existing rules a construction firm buying £10 million of new equipment could reduce their taxable income in the year they invest by just £2.6 million. With the super-deduction, they can now reduce it by £13 million. We’ve never tried this before in our country.’
“After hearing this, I wrote an article for New Civil Engineer saying ‘This is great news for our sector because, quite clearly, this is going to apply to construction equipment. It will be a good boost, but it might delay people’s equipment purchasing from March to April to take advantage of it.’ I put a line in the piece saying something like, ‘This is subject to seeing what the detail is’.
“Fast forward three or four weeks, and we and the Construction Plant Hire Association get the detail, and what we discovered is that the ‘Super Deduction’ does not apply to construction equipment bought by rental companies. Probably around 70% of what our members supply in the UK goes to plant hire. So, the budget went from ‘This is excellent’, to ‘Hmm, not quite what we had in mind’.” Some capital allowances will be useful, and we are still talking to the Treasury to find out if the ‘Super Deduction’ offer is as they intended.”
For Oliver, a key part of the UK spring budget announcement was what was not said. “That refers to the previous commitment to infrastructure spending, and that’s a good sign as I think that means the commitment is still there. However, we need to be cognisant of it in future budget statements as infrastructure spending is our lifeblood. It also links into the environment and sustainability agenda: having the most efficient and greenest machines building new environmentally-friendly homes and transport infrastructure.”
Remaining on the topic of new UK infrastructure, Oliver emphasises the importance of current British megaprojects, including HS2, Hinkley Point C Nuclear Power Station, Heathrow airport expansion and Lower Thames Crossing.
“It’s definitely stimulated demand. If you take HS2, for example, we engaged with the project in its infancy six or seven years ago. It’s important for two reasons: one is the equipment demand it brings. We’re talking about thousands of machines working on its various work sites. At any one time, there’ll be 20 sites in operation along HS2’s route. Secondly, because it’s a 20- to 25-year project, it gives new generations of machines the opportunity to be used. The investment decision is so much easier to make. It also means that someone can start work on HS2 and come up for retirement 20 years or so later.
“These kinds of projects set the framework for future demand. It’s not just about the equipment we make here; it’s about the equipment from mainland Europe and beyond that is supplied to UK companies. It makes our market a very significant one in Europe.”
Oliver acknowledges there are always challenges when it comes to delivering major new infrastructure projects. “There are debates still going on about the Heathrow expansion plans with some questioning whether, for example, we’ll need planes so much in the future given the harm they cause to the environment. Shipping, as well as plane emissions, are coming back into the discussion.”
U.S. President Joe Biden’s much publicised US$2.3 trillion infrastructure plan is something that Oliver has been following very closely.
“I’ve been associated with construction equipment for three decades, and a major spending programme on infrastructure is something that has never been delivered in America. One of the previous times they tried, they transferred a lot of money to individual states, and those states used it to pay off existing debts.
“The new plan is very significant for our industry, as 60%-plus of what we manufacture here is exported – and North America is up there with Europe in its importance.
“It’s not just very significant to the big manufacturers that people are familiar with, its companies that supply specialist components or items of software.”
I am keen to get Oliver’s take on whether there is any early evidence that the UK government’s ‘Levelling Up’ agenda, aimed at improving transport and other infrastructure in the Midlands and North of England, while also creating new job opportunities in economically depressed towns and cities.
“We saw some encouraging signs linked to it in the recent spring budget. People tend to think that where our offices are in North Yorkshire is very remote, but within a half-hour drive of here, we will have an ‘Economic Hub’ in Darlington, which will include the Treasury and other government departments. Leeds is going to host the UK Infrastructure Bank. And then a little bit further up the road, you get to Teesside, which will be home to a freeport. These are important economic growth indicators rather than specific projects that are going to help our members.
“To take things a stage further, while sticking to environmental targets, we need to lay out how we’re going to get from the idea of ‘Levelling Up’ to the practice of ‘Levelling Up’. Some of the local mayors will have a big say in that via how they leverage their political capital. It’s not all about government investment; it’s about giving confidence to private investors to put money in.”
Returning to the impact of Brexit on the UK construction equipment sector, Oliver says: “If things go according to plan, the shockwaves won’t be felt forever. We have to consider whether our position in Europe will affect our ability to supply and meet orders within the EU for projects that are paid for by the EU budget. That could potentially exclude some of our members from supplying products to the sort of projects that they had been supplying in the past.”
Asked about the potential long-term impact of the COVID-19 pandemic on the UK and wider world construction equipment industry, Oliver says: “I think it’s led to reflection on supply chains. I think we’re going to see economic recovery at different paces in different regions around the world. When we had the COVID-linked industry closures last spring, it wasn’t just about factories being closed; it was about whether materials were coming into those factories for production processes.
“At the moment, there are issues around a shortage of steel supplies. A lot of steel is being sucked into China due to the very quick recovery of its economy. It may cause some manufacturers to come up with contingency plans going forward because, frankly, we don’t know if there will be a pandemic season every couple of years.
“Also linked to contingency planning is the hope that more companies now invest in new plant featuring latest technologies, which will increase efficiency and greener production. It’s been very heartening to see the number of new machines and linked technologies being launched in recent months, regardless of the pandemic.”
Sticking with the subject of forward planning, I ask Oliver what he still wants to achieve as CEA CEO while touching on what he feels are his and the CEA’s biggest achievements to date.
“We set up our anti-plant theft campaign, CESAR, over ten years ago. It was to do with the marking and registration of construction plant, which was subsequently widened to include agricultural plant. From that, we were able to get a specialist police unit to look at it. Their operations were suspended a couple of years ago, but we are on the verge of launching a new unit dedicated to looking at construction and agricultural plant theft. We have to do that because business crime is not seen as important as crime against the individual. That’s fair enough when you’re talking about investigating physical harm to people. But it feels like there’s a mindset of ‘business can look after itself’.”
Oliver gives an example of how construction plant theft may occur. “You may have a construction plant hire company, and a new customer knocks on the door and says they want a couple of backhoe loaders for a week, and can you supply them. You can meet the order, and they pay you—all good. The following week they request four backhoe loaders and pay you. The week after that, they ask for ten backhoe loaders which you supply, but this time they don’t pay you and don’t return the machines. You then realise you’ve been a victim of an elaborate fraud. The problem is that unless it’s a massive fraud or on the police’s priority list, the chance of this crime being investigated at a local level is minimal. This is why we and our partners in the insurance industry need to put some money into creating a police unit that would do something to tackle these kinds of offences.
“More recently we have successfully enhanced CESAR to include an Emissions Compliance Verification (ECV) option. This is already helping HS2, who were key partners in developing the scheme, to identify machines on their sites to ensure they meet the engine emission ratings they require.”
Helping CEA members boost their sustainability credentials is another crucial work area for Oliver and his association management team. “It’s gone from companies thinking that sustainability sounding like a good idea, to having to do something on it to get a bank loan or deal with a company further up the supply chain.”
Oliver says the CEA and wider construction equipment sector also needs to do more to increase its diversity. “As a sector, we are still rather white male-dominated. It’s also the same in our trade association. We’ve never had a woman or an ethnic minority individual in the senior elected position within the association. That has to change, and it will change.
“I think general opportunities in our sector will open up, with more companies becoming receptive to a new kind of worker. Currently, the average age of an excavator operator is still in the high fifties. With the technology that we’re bringing in and the skills needed to operate machines, it aligns more with what the younger generation is more familiar with.
“I remember when the CEA attended the last PlantWorx in 2019, and the most successful part of the exhibition were people queuing up to have a go on the excavator simulator. That’s the quite exciting direction of travel for the construction equipment industry.”