Growth in outsourcing and a new federal transportation bill will support demand
Los Angeles, CA (PRWEB) October 14, 2012
The US road network is one of the country's largest and most valuable assets. The Road and Highway Maintenance industry ensures that the nation's 8.6 million lane miles of roads are maintained at a suitable standard to enable efficient and safe transportation throughout the life of the asset. Over the past five years, federal investment in transportation infrastructure through the American Recovery and Reinvestment Act of 2009 and the current surface-transportation bill (Safe, Accountable, Flexible, Efficient Transport Equity Act - A Legacy for Users) has kept revenue growing steadily. “These investments have kept the industry on a consistent upward trend despite recent cuts in state and local government funding for highway and road maintenance,” says IBISWorld industry analyst Lauren Setar. As a result, the industry's revenue is expected to reach $46.6 billion in 2012, increasing at an average annual rate of 3.7% from 2007 to 2012.
While industry revenue has grown strongly, profit margins have increased only slightly from 6.3% of revenue in 2007 to 6.6% in 2012. The majority of industry demand comes from state and local authorities looking to achieve cost savings by outsourcing maintenance services to the private sector. As a result, price competition among road and highway maintenance contractors often restricts profit margins. The reliance on funding from state and local authorities also limits profit because it keeps the industry geographically dispersed, limiting individual companies’ potential for expansion. According to Setar, “although California, Texas, Pennsylvania, and New York have the largest road and highway maintenance expenditure, these states appropriate this funding through varying channels and also differ in the levels of work they contract to the private sector.” These factors contribute to the industry’s low level of concentration. Nonetheless, employment in the industry has increased over the past five years, growing at an average annual 1.8%. In 2012, the Road and Highway Maintenance industry employs about 171,487 people in 10,283 establishments.
In 2012, revenue growth is expected to increase 2.2%, after growing only 0.5% in 2011, as the flow-through of economic stimulus funds concludes and state and local governments continue struggling to balance budgets. Nonetheless, a recent rise in total vehicle miles has and will continue to keep revenue buoyant, as the increased ware and tear on highways boosts demand for highway and road maintenance. In the five years to 2017, the industry's revenue is anticipated to increase at an average annual rate of 3.0% to $53.9 billion. In the immediate term, industry performance is expected to slow to a more moderate pace. More substantial revenue growth starting in 2013, however, will be supported by the new federal transportation bill, continued improvements in state and local transportation outlays and an increase in the outsourcing of public-sector highway maintenance activities. For more information, visit IBISWorld’s Road & Highway Maintenance in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises contractors involved in the maintenance, repair or renovation of existing highways or streets; construction management operations; and those that operate as special trade contractors engaged in performing subcontract work in the maintenance of highways and streets (e.g. surface repair, road clearing, guardrail repair, drainage repair). The industry does not include services from government establishments.
Key External Drivers
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Globalization & Trade
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