The general purpose contractor that turns over £70-200m and bases its success on good relations with local councils and health authorities in a particular region has long been the backbone of Britain’s building industry
During the boom, it became apparent that they were not doing as well as the super contractors that were transforming themselves into construction’s equivalent of Tesco and Asda, but the recession is exposing just how hard life has become for them.
The disappearance of private commercial work has hit them, as it has the big firms, but firms such as Kier and Laing O’Rourke could fall back on national frameworks, particularly in the public sector, which regional firms could not. In many cases, the result has been a halving of turnover, which makes cash flow a nightmare to manage. Throw in Office of Fair Trading fines, tightening credit and tax clampdowns and you get an idea of the pressure smaller outfits are under. Many tears are shed over the fact that one pub goes into receivership every week, but as we reported last week, almost two construction and property firms went bust every day last year. Among the recent casualties were some well-known firms, such as William Verry Construction, Lancsville, Concentra and Multibuild.
Contrast this with the titans listed in our league of Europe’s top 200 contractors this week. As our interview with Vinci’s John Stanion shows, larger firms can now expand at will – although all will stress the need to fit acquisitions into their strategic plan. That was how Vinci became the world’s biggest contractor, and it won’t stop now. Back in Britain, Balfour Beatty looks likely to add Multibuild to its list of recent purchases. These include contractor Cowlin, social housing firm Strata and of course Parsons Brinckerhoff. Multibuild’s specialism in budget hotels coupled with its solid reputation in the North-west made it attractive to Balfour – although a low sale price is likely to be the clincher.
Even at the top of the market there is a division between those in the European superleague, including Balfour, and those with turnovers below the £5bn mark, such as Laing O’Rourke, Bovis Lend Lease, Morgan Sindall and Skanska. Most of the majors have made job cuts, and in the future most expect to trade with 10-20% lower turnovers.
Many tears are shed over the fact that one pub goes into receivership every week, but as we reported last week, almost two construction and property firms went bust every day last year
Consolidation is inevitable, and not necessarily a bad thing. But just as we don’t want every pub to be a Wetherspoons, the industry would be impoverished by the loss of good regional contractors. If the best are to survive, they have to find their voice. Bob Rendell, the chief executive of Leadbitter, set an example in lobbying for Partnerships for Schools’ academies framework to be split in two, and we report this week that regional frameworks will be set up for its maintenance work. So the future may be a rocky road, but hopefully not impassable.
Denise Chevin, editor
That’s a plan?
No comfort this week for housebuilders attending the debate between the three main parties on housing, organised by Building with the RICS and Property Week. The industry is worried that the Conservatives’ plan to replace housing targets with financial incentives will make it more difficult to get planning permission. Barratt and Taylor Wimpey have warned this week that a change in government could lead to planning chaos, and to make it even worse, Grant Shapps is pledging to introduce the new regime almost immediately if his party wins. Most in the sector think this is ill thought through, and one wonders what Conservative councils will make of it when they find themselves out of pocket for making the wrong planning decision.