In this article, we have collated feedback from our team to wrap up the industrial capex project outlook at the end of 2022, and look ahead to the commercial outlook for capex investment in 2023. For a more specific analysis of projects entering the procurement phase in 2023, see our article here.
As we move toward the end of 2022 we look ahead to the industrial capex project outlook for the year ahead. Toward the end of 2022 we saw project sanction start to slow as continued pressures on resource meant that organisations had to postpone or prioritise works after being constrained by resources to move projects toward implementation.
This has meant however that many companies are reviewing supply chains and supplier bases which has given lots of opportunity for new suppliers to get involved with new projects and companies as lead times stretch out due to postponement or delay. As such, it has been a positive period for establishing and growing new relationships with end users and main contractors.
Projects are generally proceeding on a design and build basis rather than EPC as it has been deemed a less risky approach in light of external pressures and challenges.
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The main challenge aside from resource constraints is energy and raw material cost increases. Many organisations are revisiting their capex plans in light of high energy costs, as margins are squeezed by increased costs of production. Investment is therefore being directed into more agile upgrade projects, targeting efficiency and sustainability and more of a focus placed on key products and brands.
In the food and drink sectors there is a large amount of consolidation taking place to streamline operations ready for the years to come. Conversely, the scale and scope of projects in the pharmaceutical sector is expanding, with project values increasing as companies take a much longer-term view. R&D remains a booming area across our reporting regions.
New technology and machinery upgrades are a major focus – particularly where this can provide energy or cost savings or help move sites toward a more carbon neutral production position (for example, packaging formats, on site storage capabilities, CHP or shared service energy plants).
Inward investment is also contributing to the positive picture for 2023. The mixture of investment is changing as companies review their capex plans, but this is mostly expected to impact the middle bracket of project sizes. Smaller value projects (£5m or under) are predicted to be strong for implementation next year, and there is little indication that larger schemes will be delayed (those over £50m). Schemes in between are the main focus of scaling down and cost saving measures, although the situation remains very fluid.
Resource constraints have also meant that smaller contractors and suppliers may see more opportunity in 2023 as larger companies are forced to turn down work due to a lack of capacity, opening up the procurement opportunities considerably.
To summarise the industrial capex project outlook for 2023 – there is a high level of capex project investment in early design phases for implementation and delivery in 2023, across all of our reported industrial sectors. The view is that there is a glut of work to go around with confidence levels surprisingly high despite challenging external factors.
Are you looking to boost your commercial success in 2023? Contact us to talk about how we can help.