Even those firms reliant on Continental markets displayed nonchalance. "It doesn't make a blind bit of difference," says Gordon Oliver, the finance director of James Halstead, a materials manufacturer that depends on trade with France and Germany. "We're not doing anything different."
In other words, for most of the construction industry, the euro is just another foreign currency and its introduction is not expected to have a significant impact in the short term – although it may bring long-term structural changes.
Although the adoption of euro in 12 of the European Union's 15 member states is the most dramatic element of the push for economic integration, it is only one part of the drive towards the free movement of goods, people, services and capital within the union. In theory, this should lead to a single €1000bn continent-wide construction market – but in practice there are high barriers to overcome.
In March 2000, a European Council summit in Lisbon announced that it wanted the EU to become the world's most competitive economy by 2010. Clearly, that goal can only be achieved by enabling firms to fully exploit the union's vast single market, and already, dozens of proposals harmonising everything from procurement to site safety have emerged from the European Commission.
In a true single market, a Spanish contractor would be perfectly at home bidding for an office development in Leeds – hardy likely in the current situation. Even if Señor Dominguez understood Yorkshire-inflected English, he would still have to compete against firms intimately acquainted with, for example, the peculiarities of UK commercial law, labour regulation and its system of professional qualifications. So far, the politicians' plans for creating a truly level playing field has made little difference to the Europe's construction industry, which is subdivided into well-established and well-defended local markets. Few firms make much impact beyond their national borders.
Inevitably, some firms are happier with the status quo than others. This means that the integration process is being played out as separate political struggles within individual countries, as trade associations lobby against the ratification of directives that would expose their members to intensified competition (see Austria, opposite, for a cautionary tale).
The euro doesn’t make a blind bit of difference
Gordon Oliver, finance director, James Halstead
Aggressive firms should be able to counter this with their greater clout in Brussels, but this does not seem to be the case. "Construction is a joke compared with an industry like telecoms, which has its own directorate-general [at the European Commission] and therefore far greater influence," says Jill Craig, head of European policy at the RICS. "For an industry that represents roughly 10% of pan-European GDP, that is ridiculous."
Other industries, such as car making, reorganised themselves as international concerns long ago as they sought the efficiencies needed to repel cheaper imports. But in construction, the knowledge of local conditions is often more important than efficiency, which makes it largely immune to the forces of globalisation.
"Construction is traditionally fragmented [with] many local or regional players," says David Lawrence, regional managing partner for Europe at EC Harris in Berlin. "There are very few contractors that operate on a pan-European basis. The individual contractors often rely on their own supply chain of subcontractors, different languages, laws, culture and practices."
The situation does not seem to have changed much since BAA invited French contractor Bouygues, the second biggest construction concern in Europe, to work on an airport project a decade ago. The company replied that it was not interested unless it could bring its entire supply chain from with it. Even the introduction of compulsory Europe-wide tendering for public projects through the EU's Official Journal has done little to prevent anything but the biggest jobs going to local firms. However, a number of UK firms are tapping into huge EU-funded infrastructure projects and the growing PFI market.
Because it's worth it
Despite the difficulties, smart UK firms – particularly consultants – are finding ways around them. Those who get it right will profit in the long term, as there are a number of forces in play that could create a more unified European construction market.
The first is being driven by multinational clients, who are increasingly demanding cost and quality improvements in their construction projects. UK firms, particularly consultants, are set to do well out of this as they are regarded as more innovative and proactive than their Continental counterparts and, thanks perhaps to the Egan agenda, are more client-focused. Arup, for example, is setting up offices across Europe to capitalise on the trend. "There will increasingly be a multinational market," says Phillip Dilley, the director responsible for European business at Arup. "Clients want a common level of quality. There aren't a lot [of consultants] that can network between countries."
You don’t succeed in Europe by sending in a load of expats
Phillip Dilley, Arup
But ignore the local culture at your peril: "You don't succeed in Europe by sending in a load of expats," says Dilley. "You've got to find local people who are good enough but also identify with your company's culture." Researching the market is also essential. Arup's facade division is doing well in Germany but less so in France, where cladding tends to be less sophisticated.
Another trend is towards the global sourcing of building solutions and materials. In 1997, Bovis signed a groundbreaking construction and facilities management contract to build thousands of petrol station canopies for BP in 14 countries across Europe and beyond. Bovis sourced them from a single manufacturer in Spain; after three years, they had reduced the cost of building a station by almost 30%. Similarly, BAA this year formed a "buy club" with airport operators in France and Denmark to procure standardised air bridges from a French supplier.
Other firms are dabbling with European materials: much of the London Eye was fabricated on the Continent, and Willmott Dixon is using French-built bedroom pods at a hotel development in east London. At the same time, this strategy is still in its infancy – less than 0.5% of Willmott Dixon's purchasing spend goes overseas, and usually for specialised products that are not available locally.
One area where the single market will certainly be harmonised is standards. These are being drafted and will soon make it easier for specifiers to look abroad. "In about five years, we will be facing European standards that are very different to our current British ones," says Ian Macpherson, the Building Control Forum's European adviser. Products will increasingly have to conform to a single CE standard – the general European quality mark – instead of conforming with multiple national standards.
There is no sign yet of the same thing happening with professional qualifications. EU nationals can theoretically work in any member state, but in practice it is difficult to establish whether skills learned in one country qualify the holder to work in another. For example, a surveyor can design buildings in the UK but not in Belgium, where only a qualified architect can do that job.
Now, an organisation called the Forum of European Construction Professionals is calling for all construction qualifications to be benchmarked according to the skills the holder has mastered. "We're calling for mutual recognition of competencies," says the RICS' Craig, who is also a member of Forum of European Construction Professionals. The FECP is lobbying the European Commission to include the proposal under its paper on the removal of barriers to cross-border services.
Should the UK join the euro?
Michael Ankers, chief executive, Construction Products Association
Currency volatility is a real issue for us. In 1998, the pound appreciated by 20%, which meant that our prices did too, so a stable exchange rate would be an undoubted advantage. Two years ago, 60% of our members voted in support of the euro – a strong result. Also, when the currencies were locked against the euro two years ago, the European Central Bank reduced interest rates, which is another potential benefit for business. No
Matthew Eyles, Allen Tod Architects
When it comes to architects’ fees, we don’t care what currency we get paid in, as long as we get paid. The serious point is that at the moment the flexibility between different exchange rates can be used as a lever to stabilise local economies, especially ours. If there is a single currency, then when one goes into recession, they all do. Maybe
Colin Wyatt, senior partner, Gardiner & Theobald
The UK is doing surprisingly well at the moment compared with the rest of Europe and so I’m worried that if we go in we won’t have control of our own currency. It means when things do get tough here and not so tough in Europe there won’t be much we can do about it. It is difficult to judge what it will mean for the construction industry because there hasn’t been a serious debate yet. I look forward to that happening.