Reading Between the Lines - August 2017 Review & Commentary of Construction New Orders from Builders' Conference

04 Sep 2017

Thanks in no small part to the award of almost £7 billion worth of HS2 contracts, the BCLive league table for August 2017 smashed all previous records.   But the underlying figures remain a cause for concern, according to The Builders Conference CEO Neil Edwards.

In a month in which the massed ranks of the UK construction industry amassed a staggering £11.26 billion worth of new contract awards – smashing into smithereens all previous monthly records in the process – it seems churlish to take a pessimistic, glass-half-empty stance.   But while August 2017 will go down in BCLive league table history as the first time the value of contract awards surpassed the £10 billion mark, it is the figures lurking just below that exemplary total that, perhaps, truly define the current state of the UK construction sector.

The £11.26 billion monthly total was accomplished with less than 450 new contract awards when 500 to 600 is the established norm.   And that total was achieved by 267no individual contractors when most months’ include figures from 330no or more.

Such concerns should not, however, detract from the achievements of the numerous companies involved in the various joint venture businesses that have been charged with delivering the initial phase of the HS2 high speed rail link.

In a month categorised by a spate of billion pound contract awards, the BBV joint venture – comprising Balfour Beatty & Vinci Group – will be the most happy.   That joint venture bagged two parts of the Area North section of the HS2 build valued at £1.5 and £1.32 billion respectively.

The SCS joint venture comprising Skanska YK, Costain & Strabag also bagged an HS2 double with the S2 Northolt Tunnel section valued at £1.1 billion and the S1 Euston Tunnel section valued at £740 million.   This twin-contract haul propelled the joint venture company to number two in the BCLive league table.

Powering into the number three spot – again with a pair of HS2 contracts – is the CEK joint venture made up of Carillion, Eiffage & Kier Group.   CEK notched up a £724 million contract for the C2 North Portal Chiltern Tunnel section together with a £616 million award for the construction of the C3 Brackley to South Portal portion.

The Align joint venture – Bouygues, VolkerFitzpatrick & Sir Robert McAlpine– collected the £965 million contract for the C1 Chiltern Twin Tunnels and Colne Valley Viaduct section to take fourth spot.

Surrounded by joint venture companies, Laing O’Rourke was the highest-placed company to make the upper echelons of the BCLive league table independently this month.   The company won the £700 million refurbishment and repair contract that will see a major overhaul of terminals one and two at Manchester Airport.

Sir Robert McAlpine won four new contracts worth a combined £247 million to take the number six spot this month.   The largest of these was for the refurbishment and repair of Nottingham’s Broad March shopping centre.

But it is the news below the month’s headlines that, perhaps, provide the greatest insight into the true state of the UK construction sector.   And no company exemplifies that more than Morgan Sindall.   The company is an almost permanent resident in the BCLive league table Top 10, thanks to its unerring knack of winning multiple (often 20+) contracts each month.   This month, the company bagged 14 worth a combined total of £85.4 million.

And there’s the rub.   The HS2 contract awards are a freak; an anomaly.   Furthermore, those contracts will likely run for the next five years or more.   And we don’t yet know precisely which of the constituent parts of those joint venture companies will be responsible for which parts of the works.   So it remains difficult to discern just how much each company stands to benefit in terms of both income and workload.

What is clear, however, is that those HS2 figures – together with the Manchester Airport award – paint a largely false picture.   Those companies that missed out on being part of this round of HS2, and those that could see employees jumping ship to join the HS2 bandwagon will certainly not be celebrating any time soon.

That said, more than £11 billion in a single month remains noteworthy, regardless of what the headline conceals.

Quick review of BCLive table for August 2017

267no companies were detailed as winning new construction orders during August 2017

444no new construction orders are detailed on BCLive

BBV joint Venture secure overall top spot with £2.82 billion of new work

New orders in £1M to £5M category, Morgan Sindall Group came out on top & in the £1M and under category Denmark & White Ltd from Rayleigh in Essex were the winners

Keepmoat Group secured the most number of new construction orders in the month with 16no