The poor state of the nation's road network will drive investment into roads and highways.
New York, NY (PRWEB) December 22, 2013
The Road and Highway Services industry ran into some obstacles during the five years to 2013. Industry players are usually hired to provide specialist construction services, such as highway paving, installing guardrails and street signage, and line marking for highway, street construction and maintenance projects. During the recession, local and state government spending on roads and highways (the primary source of industry demand) declined. However, the federal government was able to stabilize spending through stimulus and other infrastructure funding bills, allowing demand for industry services to remain stable. Yet, stimulus money eventually ran out, and demand for industry services began to decline. Therefore, in the five years to 2013, revenue for the Road and Highway Services industry is expected to decline at an annualized 1.2% to $26.2 billion, with a 0.3% drop in 2013 due to inadequate public-sector spending.
According to IBISWorld Industry Analyst Maksim Soshkin, “The recession caused incomes to fall and the housing market to collapse.” Consequently, governments collected less income and spent more on welfare. Furthermore, budget deficits climbed, with local and state governments forced by law to try to reduce them. Therefore, local and state government investment, which includes spending on industry services, has fallen every year since 2009. However, in 2009, Congress passed a stimulus bill and other infrastructure funding laws that temporarily allowed funding for industry projects to remain stable, resulting in industry revenue growth. Yet, this money eventually ran out and industry revenue began to fall. Simultaneously, demand from the private sector for services like driveway and parking lot paving also fell. “As revenue declined and competition intensified, many companies began to lay off employees, and some had to exit the industry,” says Soshkin.
The poor state of the nation's road network, combined with population growth and increased traffic, will drive investment into roads and highways, thereby increasing demand for industry services over the five years to 2018. In addition, as the economy improves, local and state governments will be able to spend more on industry projects. However, elevated unemployment, a slow housing recovery and Congressional budget debates will create uncertainty and tamper public-sector spending on industry services. Therefore, the private sector will be encouraged to fill the investment gap through public-private partnerships.
The industry has a low level of concentration. The larger scale contractors operate multiple establishments across several regional markets. A considerable number of large construction material producers have acquired specialized road and highway service companies to vertically integrate their business models, create new revenue streams and expand their geographic reach. These localized subsidiaries typically retain their name and local identity while benefiting from the resources of the larger national organization.
For more information, visit IBISWorld’s Road & Highway Services industry in the US industry report page.
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IBISWorld industry Report Key Topics
Establishments in the Road and Highway Services industry are primarily subcontracted to provide specialist construction services for highway and street construction and maintenance projects (i.e. new work, reconstruction, periodic maintenance or repairs). The industry mainly includes specialist contractors that carry out discrete phases within a total highway and street construction project, such as highway grading, installing guardrails, installing street signage and line marking.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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