Strategic choices

Last month's Euro Special feature in Building made interesting reading – particularly the league table (11 January, pages 50-61). Ranking construction companies by turnover isn't easy, given all their subsidiaries, joint ventures and varying activities, but it does provide a fascinating insight into some sophisticated businesses. After Enron, sceptics will be tempted to say that this is the only information they believe, as it is not likely to affect the share price.

A quick look at the table leaves you with the distinct impression that the first 10 or 20 companies don't even share similar activities. Numbers two, three and four – Bouygues, Hochtief and Skanska – have turnovers between £7bn and £8bn but the numbers of their employees varies between 41,000 and 85,000.

Among the bottom five in the top 10, turnover ranges between £3.8bn and £4.2bn but the numbers of employees varies between 7000 and 48,000. Clearly, there's a lot to be learned from these tables.

The French have obviously done a good job in consolidating and have to some extent avoided pressure from analysts to "focus and increase transparency". Their biggest construction companies are involved in a variety of activities, most – but not all – construction-related.

Since the Second World War, the German construction industry has been dominated by a few giants. And, as we've seen in the UK, if a giant has a problem, it is of gigantic dimensions. A couple of major German companies went through this. If it were not for the German government's Monopolies Commission, Hochtief and Philipp Holzmann might have merged to create the largest contractor in Europe, as their combined turnover totals almost £12bn. However, Holzmann's turnover is just a fraction of what it used to be.

In the UK, the situation is very different. I believe that our industry has greatly improved and also developed in the right direction. Unlike France, we have had little consolidation through mergers or acquisitions. The unpredictability of translating turnover into profit or loss has deterred many UK companies from major mergers. Instead, consolidation has occurred through positioning and market focus. Fortunately, the industry's Anglo-Saxon clients – and this includes most global enterprises – have welcomed this.

Bouygues, Hochtief and Skanska have turnovers between £7bn and £8bn, but their employees vary between 41,000 and 85,000

Perhaps the greatest change for the better in the UK industry was achieved when clients joined the quest to improve the whole construction process. Both Sir Michael Latham and Sir John Egan contributed greatly by examining how it worked and could be improved.

In the USA, the complex challenges of the NASA space programme led to the development of sophisticated project management techniques and partnerships that united all the required and available skills in one joint effort.

It is increasingly apparent that the best results are achieved by the genuine joining of forces between clients and all members of the construction team. This is the spirit that most UK construction companies have now adopted, and individually they have used these relationships to establish themselves in well-defined markets. Some, like Amey and Jarvis, have successfully developed support services. Others have concentrated on management, specialist trade contracting, regionals and so on.

The companies in the European league table with very high numbers of staff are, of course, less focused. Some are active in areas unrelated to construction; others carry out design as well. The direct employment of skilled operatives, even facilities management staff, means a significant increase in employee numbers.

I could – but won't – pass judgment as to what extent focusing is the best route to success. Protection against the economic cycle is always an important consideration. Some will seek that in geographical spread, others in their choice of construction sector, but many will opt for activities less vulnerable to the cycle.