‘Suicide bidding’ is becoming widespread throught the industry

Structural steel specialist Billington Steel has admitted it is underbidding on work to maintain turnover during the recession, having posted a £400k loss for the first half of the year.

Peter Hart, Billington’s finance director, said: “We have been taking work at very low or negative margins and that is reflected in the results.”

The news came as the firm - one of the largest in its sector - posted a loss of £400,000 for the first six months of 2011, down from an £800,000 profit last year. But turnover grew marginally, up 7% from £21.3m to £22.8m.

Industry experts warned that the phenomenon of so-called “suicide bidding” was becoming increasingly widespread throughout the industry.

Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, said: “It’s becoming more common. Firms are keeping on staff and expertise in the hope that work will pick up around the corner.

“But it’s not sustainable. The fact that a company of this stature has to do this kind of work is a reflection of where we are in the industry.”

Billington Steel also announced it is cancelling its interim dividend payment. Its cash position deteriorated from £6.9m to £2.7m over the six months. Hart added: “We’re concerned to maintain capacity and get in a good position to take advantage when the market turns.

“We always knew we wouldn’t cover all our overheads this year. But we haven’t been desperately buying up work. We expect to see margin recovery in 2012 and we’re starting to see some encouraging signs and more enquiries.”

Hart added that the firm was targeting work in the London commercial sector and for its tubular steel business, which yielded higher margins. Billington entered a joint venture earlier this year with fellow steel specialist Bourne Steel - BS2, to target the high-end London market.