Construction chief blames the strong pound and lack of infrastructure projects for the decision to dispose of steel fabricator Cleveland Bridge.
Norwegian group Kvaerner is to sell its Cleveland Bridge steel fabrication business as part of a radical restructuring.

The group has also put its Govan shipyard up for sale and announced changes at £1.4bn Kvaerner Construction.

Kvaerner Construction chief executive Keith Clarke said that, although he will be sad to lose the Cleveland brand name, the firm has been making too little for up to 10 years. He said that this lack of workload had been exacerbated by the strong pound and a lack of infrastructure projects.

The group is confident it will find a buyer for the £100m-a-year business, safeguarding more than 2000 jobs in Darlington, Dubai and Malaysia.

The aim of the restructuring of Kvaerner’s construction operations is to cut its overheads by £3.9m a year, although Clarke said there were no plans for redundancies.

Contracting is to be reorganised to give greater emphasis to specialist operations, such as the firm’s M&E arm Rashleigh Weatherfoil and plasterwork arm Clark & Fenn. Clarke said Kvaerner sees subcontracting work as more profitable than general building and civils work.

The two specialists currently account for 34% of contracting turnover, but Clarke wants to see their contribution grow to 40-50% without seeing a fall in the firm’s other work.

Clarke said Kvaerner intends to retain its position as the UK’s third-biggest contractor, but Clarke was less certain about the firm’s overseas operations. It will also continue to be Hong Kong’s biggest contractor, through its Gammon subsidiary, but Clarke said the market in South-east Asia was patchy. Kvaerner has already scaled back its presence in Thailand, Malaysia and Indonesia.

The firm also plans to sell its corporate development arm, but plans to continue to take stakes in private finance initiative projects.

The changes within Kvaerner Construction come against a backdrop of heavy losses across the group dating from a diversification that included the acquisition of Trafalgar House in 1996.

Clarke said he was heartened that construction remained a core business. He said: “It is a great relief that we have a clear signal from our shareholders and banks to proceed with this restructuring.

“It will be a long, sensible grind over three years, but this is the end of the beginning.”