Federal stimulus money prevented industry revenue from diving in the past five years
Los Angeles, CA (PRWEB) April 12, 2013
Demand for tunnel construction services is coming out of the dark. “The economic downturn decimated demand for industry services as state and local municipalities cut back expenditures on transportation projects and private investments contracted,” says IBISWorld industry analyst Deonta Smith. A shortage of property and fuel tax revenue, coupled with the rising need for unemployment insurance, prompted state and local governments to cutback transportation expenditures during the recession, hindering industry expansion. Due to these trends, IBISWorld expects revenue to drop 1.1% on average to $1.8 billion in the five years to 2013. In response, the federal government implemented numerous initiatives such as the American Recovery and Reinvestment Act of 2009 and Moving Ahead for Progress in the 21st Century Act to assist the industry in a turnaround.
Over the past five years, utility tunnel maintenance and construction has emerged as one of the strongest needs in many states. According to Smith, “Aging pipes and innovative plans to acquire more resources have prompted demand for tunnel construction projects.” In addition, demand has grown with an increase in private toll roads; as such, private investors have become significant sources of demand for the Tunnel Construction industry. As a result of foregone maintenance on utility tunnels and an increase in public private partnerships, demand for tunnel construction services is slated for an immediate increase in demand. Subsequently, IBISWorld expects revenue to increase 2.8% in 2013.
The Tunnel Construction industry has a low level of market share concentration. In 2013, the top four companies will account for less than an estimated 15.0% of industry revenue. During the past five years, the number of companies has remained flat, increasing at an estimated annualized rate of 0.6% to 110. During the next five years, the number of companies is projected to increase at a faster rate, growing at an average annual rate of 1.6% to 119. The growth in the number of industry companies will be supported by moderate barriers to entry and increasing federal spending on tunnel construction services.
The industry is forecast to return to grow strongly over the next five years. As the economy recovers, demand from private-sector development will normalize, and state and local governments' transportation outlays will rebound, offsetting the drop off in federal stimulus investment. As a result of pent-up demand from delayed projects, industry employment is expected to increase. The number of employees is projected to rise at an average annual rate of about 4.9% to 6,682 contractors.
For more information, visit IBISWorld’s Tunnel Construction in the US industry report page.
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IBISWorld industry Report Key Topics
This industry constructs tunnels. Types of projects include new work, reconstruction and repairs. This industry does not include road and highway construction activity.
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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