Cut VAT on retrofit work, new Wates boss tells government as firm hits turnover record

The government needs to be more ambitious with its net zero agenda and should begin by removing VAT from retrofit work, according to the new boss of Wates.

Speaking in his sixth week at the helm of the firm, chief executive Eoghan O’Lionaird said it was “self-evident” the UK needed to decarbonise the built environment “through retrofitting the buildings that are currently standing” and urged government to “think longer term on decarbonisation”.

“Government should do their part in clarifying the regulatory landscape that will facilitate longer term planning and longer-term investment towards that end,” he said. “[Removing VAT] would be such an easy give and such a sensible give and such a powerful promoter of retrofitting towards zero carbon.”

O’Lionaird’s comments on retrofit come on the morning of the government’s so-called energy security day – previously billed as ‘green day’ – which is expected to see the announcement of a new net zero strategy along with a raft of measures drawn up to bolster the UK’s energy security.

He was speaking as Wates said turnover hit a record £1.89bn last year, a rise of 17% on the year before. But pre-tax profit was down 6% to £33.7m.

O’Lionaird, who joined from £500m turnover marine services firm James Fisher & Sons and was brought in to replace David Allen, now the finance chief at Mace, said Wates’ total forward order book was up 17% to £8.35bn. The firm had £153m of cash at the year-end.

Revenue at its construction arm, Wates’ biggest, was up 24% to £958m, with the business recording its highest ever average contract value size at £43m.

This included projects such as the Sandwell Aquatics Centre, which was used in last year’s Commonwealth Games in Birmingham, and £100m worth of work on Wates’ largest ever job – the £500m Envision AESC gigafactory in Sunderland.

Chief financial officer Philip Wainwright, who served as interim chief after Allen’s departure, said battery manufacturing factories could be a “rich seam” of work for the construction sector, but that the jobs were “not straightforward”.

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“This is sophisticated, complicated M&E that very few others are able to integrate with their construction animal,” he said.

O’Lionaird, a Japanese speaker, said Wates was in a good position to compete for phases of work on the job for Envision AESC, which is headquartered in Kanagawa, and pointed out that decarbonising road transport was going to require “hundreds of thousands of cars worth of batteries”.

“So we are going to need many of this scale of factories in the UK alone, and the UK has expressed the ambitious to become a supplier internationally of electric car batteries – so the opportunity for Wates is quite substantial.”

Asked about his strategy for the business, O’Lionaird said it was too soon into his tenure for him to “expound on any particular philosophy as it pertains to Wates”.

But he said the firm had a “very clear sense” of the part it wants to play in the built environment, centred around the net zero agenda. “Whether that is constructing zero carbon, whether it is supporting the decarbonisation of social housing, or whether it is in building factories such as the gigafactory, we regard this not just as an opportunity for the company, but also as part of what makes Wates tick.”