Contractor posts soaring profit but deputy chief executive predicts supply chain woes ahead

The deputy chief executive of Mace has warned that major contractors’ supply chains will be disrupted as smaller firms are unable to cope with public sector cuts and developers defaulting on payments.

Mark Reynolds’ remarks come as the contractor building the Shard (pictured) posted soaring profit and turnover, increasing by 30% and 18% respectively in 2009.

He said that although larger firms would survive government cuts, they would see disruption to their supply chain as subcontractors are squeezed by a lack of work.

“Any short sharp cutback is going to have an impact if you are highly reliant on one area of the sector. Our concern is about the smaller guys. Local suppliers are dependent on work from us and this could affect our supply chain. But the top 30 contractors will ride it out,” he said.

Reynolds also predicted that smaller firms are still at risk of major clients running out of money. “The thing that is going to take smaller people to the wall is a client not paying,” he said.

This week Mace announced that pre-tax profit to the year ending 31 December 2009 was £19.3m, up from £14.9m in 2008.

Turnover also rose to £726m compared to £617m the previous year, and the company said it ended the year with a cash balance of £106m.

Sixty-three per cent of Mace’s turnover came from UK construction, 19% from UK consultancy and 18% from overseas consultancy and construction.

Reynolds, who in January was lined up to take over from current chief executive Steve Pycroft by 2014, reaffirmed that the company was still looking towards private sector projects like the Shard, despite comments from Pycroft that Mace was focusing “away from commercial construction”.

He said: “We’re continuing to focus on commercial but moving into new areas. Last year we started working with the Highways Agency. We’re also beginning to do more work with Network Rail.”

Group finance director David Vaughan said the firm was on track to hit £1bn in turnover in two years’ time.