Markets

Global overview

Balfour Beatty operates in three distinct infrastructure markets: transportation; utilities; and social infrastructure such as education, healthcare and social housing.

The Group's capabilities extend from development, engineering and construction to the maintenance and management of infrastructure assets.

Balfour Beatty also finances infrastructure projects, through Public Private Partnerships (PPP), as well as direct investment.

The majority of Balfour Beatty's work is with public sector or regulated customers. This market for the Group's services is resilient and driven by a number of key global factors.

Infrastructure trends

Public sector and regulated customers typically invest through, rather than in line with, the economic cycle – in contrast to private sector investment. In challenging economic conditions such as those currently being experienced worldwide, there is often the potential for markets to benefit from government stimulus packages to increase employment and demand.

A range of additional factors is also driving global investment in infrastructure, including:

• population growth and demographic changes;
• urbanisation, which requires major infrastructure investment;
• international trade, which drives the need for quality transport networks;
• sustainability issues, which are raising the standard for both air and water quality, and requiring the upgrading of power and water treatment facilities;
• ageing infrastructure, which requires extensive renewal and upgrading – particularly in developed economies, including Balfour Beatty's core UK and US markets.

Infrastructure demand

Infrastructure owners look to organisations like Balfour Beatty for an increasingly sophisticated approach to infrastructure procurement, including the requirement to:

• provide a broad range of services;
• engage earlier in the construction process;
• provide expertise in life cycle management of assets;
• finance the provision of those assets and services; and
• integrate a range of capabilities to suit the requirements of individual projects.

Markets and opportunities

Transportation

Road
As GDP increases, there is a corresponding growth in road usage. Governments worldwide are seeking to improve the management of road networks to enhance transportation links and reduce congestion.

Balfour Beatty's capabilities extend across the life cycle of roads infrastructure, from construction to asset management. The Group is well-placed to respond to the evolving requirements of the Highways Agency in the UK and Departments of Transportation in the US.

Rail
Increased road congestion is driving governments towards public transport, with rail being a prominent solution. The success of the european high-speed rail networks is likely to stimulate investment internationally. In the US alone, over 20 cities are considering new light rail networks or extensions to existing systems. Environmental pressures are likely to increase the electrification of rail networks, as network operators move away from diesel.

Balfour Beatty has an international rail capability and proven expertise in electrification.

Aviation
The aviation sector requires investment on land-side and air-side, as well as in terminals, to meet increasing passenger flows generated by both trade and tourism. Balfour Beatty has an extensive track record in aviation, including involvement at Gatwick and Heathrow airports in the UK; O'Hare (Chicago), Dulles (Washington) and Miami airports in the US; and many more of the world's busiest airports, as well as valuable experience as an airport owner and operator, through investments in Exeter and Blackpool airports.

Utilities

Electricity
Economic growth and increases in population are driving demand for electricity worldwide. Over half of investment in OECD countries is forecast to be in transmission and distribution networks, where Balfour Beatty has extensive experience.

Investment will be further stimulated by the need to upgrade the ageing assets of the 1960s and 1970s which cannot support modern demands, as demonstrated by the recent history of blackouts and brownouts in both the US and europe.

The move towards renewable and distributed energy generation will also require the reinforcement of the national grids in the US and UK.

Water
Increased prosperity, irrigation for agriculture, industrialisation and urbanisation are all contributing to increased global water usage with consumption expected to rise from 2,100km³ in 1995 to 2,800km³ by 2025. With increased demand, the substantial leakage from ageing networks is becoming a critical issue.

With the Group's wide experience in the water sector, particularly in networks, Balfour Beatty is well-positioned to meet the challenges for infrastructure owners worldwide.

Social infrastructure

Healthcare
Ageing populations and medical advances have seen healthcare expenditure in OECD countries increase.

Balfour Beatty is a major participant in UK healthcare programmes such as acute hospital PPP and ProCure21, while in the US, the Group has long-standing relationships with several major health providers.

Education
Education is a key element in governments' drive to address skills shortages and this is driving infrastructure investment.

In the UK, for example, the Government is currently engaged in major investments through its Building Schools for the Future, National Academies and other programmes.

The US marketplace is further stimulated by demographic factors, including immigration and migration to the sun-belt states such as California, Texas, Florida and the Carolinas, where Balfour Beatty has a strong presence and is a market leader in education.

Social housing
In the UK, the Government has acknowledged the role of social housing, for which Mansell is a leading provider, in dealing with the shortage of key workers. A large programme, which includes opportunities for financing innovations, is currently underway to build 155,000 new homes each year. In addition, the Decent Homes programme, which aims to improve the quality of aged housing stock, represents another substantial source of opportunities to 2011 and beyond.