Contractor says market remains challenging in update to the City

Balfour Beatty has provided few further clues to the nature of its restructure of its UK Construction services division in an update to the city today, but warned that the outlook in the construction sector in the UK remained “challenging”.

In an interim management statement the global construction and infrastructure giant said the group’s overall performance was “consistent with the outlook given at the time of the full-year results” and that while there were some “signs of recovery in the US”, the UK construction market remained “challenging”.

The firms said: “Looking ahead, the operating environment in the construction sector remains challenging in some of our major markets. While US market recovery and liquidity improvement in Dubai bode well for upside, the UK market is expected to remain competitive.

“We are taking the necessary actions to manage the businesses through this period including those which will drive further structural efficiency across the Group.

However, the contractor gave no further updates on the restructure of its UK Construction services division.

As first revealed on, the heavy-weight contractor announced a restructure of its £3.4bn turnover UK construction services arm in March, with the consultation covering all 12,000 construction services staff, although only around 600 jobs are expected to be lost.

The firm is focusing on restructuring the UK construction services arm around “three main pillars” of business: regional building and civils; regional M&E; and major infrastructure.

The move was part of a wider drive to realise £50m of savings a year by 2015. In March chief executive Ian Tyler said the efficiency drive would aim to “take advantage of the increasing integration of our activities”, with £10m to be realised over 2012 - on top of the £15m already identified - £30m over 2013, and £10m over 2014.

Today the firm said: “As announced in March 2012, we are building on the existing programme with additional targeted savings of £50 million p.a. by 2015.

“Some of these measures will impact existing employees and a consultation process has now started. The majority of the benefits of this programme are likely to be delivered in 2013, underpinning margins primarily in UK Construction Services and Support Services.”

The first phase of the consultation was expected to conclude at the end of April, with a decision to follow on whether to proceed with the restructure.

In another trading update, contractor Costain said it had secured £800m in revenue so far this year, with its order book currently standing it £2.4bn.

The statement said: “Whilst market conditions remain uncertain, the Group has strong financial resources and is delivering on its clear strategy.”