International contractors and clients in UK construction

Overseas-owned companies make up nearly half of the UK’s top 20 main contractors according to Glenigan’s latest contracts leagues, but international investment is much less marked. While the potential loss of overseas labour has been one of the most hotly debated aspects of Brexit, nine of the biggest contractors in terms of orders are owned by parent companies based overseas. French-owned VINCI is the highest ranked overseas contractor in the UK. In the 12 months to Q3 2017, VINCI’s £2.3 billion order book ranks the French group’s UK operations in sixth place. Lendlease, once British construction royalty as Bovis but now Australian owned, is one place behind VINCI in sixth with £2.2 billion-worth of UK construction contracts. Royal BAM, which acquired a swathe of UK operations after buying out Dutch rival HBG in 2002, is also in the top 10 with a £1.5 billion order book. Other foreign owned contractors in the top 20 include Skanska UK with a £1.2 billion order book in 13th ahead of Australian group Multiplex in 14th and the UK construction arm of French conglomerate Bouygues in 15th. US group AECOM is also amongst the top 20 after the UK consultancy arm diversified into contracting in 2015. AECOM has targeted large prestige building contracts and in the last 12 months amassed a £1 billion order book, which ranks the group in 16th position. ISG become the latest UK group to fall into overseas hands in February 2016, when US investment group Cathexis bought the contractor off the UK’s secondary bourse, Alternative Investment Market. ISG is ranked in 18th position with a £972 million order book ahead of another Dutch group, Volker Wessels, in 19th position. Of the 11 UK contractors in the top 20, six – Morgan Sindall, Balfour Beatty, Kier, Galliford Try, Carillion and Costain – are listed on the London Stock exchange. The remaining five contractors, top-ranked Sir Robert McAlpine, Laing O’Rourke, Wilmott Dixon, Wates and Mace, are privately-owned companies. Foreign ownership of smaller contractors is rare with only one other overseas-owned contractor, John Sisk, amongst the top 50 contractors in the latest leagues. In the top 100, there is only one other foreign owned contractor. Spanish group Ferrovial - the parent group of Amey - is ranked in 59th position with an order book (excluding term maintenance contracts) totalling £135 million according to Glenigan. Amongst the industry’s top 20 clients, Malaysian-backed Battersea Power Station Development Company is ranked second after letting £1.6 billion-worth of work. Indian group Tata ranked 10th with spending of £520 million and German discount grocers Lidl is 16th with spending of £346 million. Stratford City Business District is ranked in 18th after committing to £337 million in construction contracts, but SCBD is a joint venture between Lendlease and Department of Transport subsidiary London & Continental Railways. Overseas companies wholly own just three of the industry’s biggest spending clients, which suggests nervousness amongst companies in pushing the button on big projects. After a weak 2016, the construction industry in Yorkshire & Humberside is gearing up for a significant rise as work in the pipeline surges. Civil engineering and private housing are behind a forecast rise of 17% in the underlying value of project expected by Glenigan starts this year, which is expected to continue into 2018. Glenigan economics director Allan Wilen says: “Workloads weakened in 2016 after a lack of project starts the previous year and only just remained in positive territory, but the level of work moving through the planning system gives rise to a hope for a major improvement.” In the third quarter of 2017, the value of underlying project starts in Yorkshire edged up just 6%. Work in the pipeline was more subdued in this latest period but in the 12 months to September 2017 the underlying value of project starts surged 38%. In the first nine months of this year, social housing has been the main bright spot for Yorkshire’s construction industry according to Glenigan’s data. Overall housing starts have been weak according to the National House-Building Council (NHBC) and fell 11% in the three months to August 2017 but that is changing as the private rented sector (PRS) kicks off. In October, Irish developer Dandara let a contract on its £70 million Holbeck Urban Village project in Leeds to build 744 PRS homes. This will soon boost the NHBC figures. Commercial construction activity surged 11% - albeit from a low base - in Q2 2017 according to JLL/Glenigan, and the prospects of significant infrastructure growth have been boosted by the onset of the new YORCivil Framework. The second edition of the framework was agreed this summer and nearly 30 contractors including industry giants such as Kier and Morgan Sindall are expected to benefit from spending of £1 billion channelled through YORCivil 2. Both contractors are already amongst the top 10 contractors in Yorkshire according to Glenigan with orders of £193.5 million and £128 million respectively. Interserve, winner of the contract to build Holbeck Urban Village, is the region’s top contractor in Yorkshire with an order book totalling £286.5 million in the 12 months to Q3 2017 and on YORCivil2. Two other big contractors ranked in the Yorkshire top 10, Galliford Try (£153 million) and Carillion (£86.2 million), are also on the framework but so are a host of small-to-medium-sized local players, such as Esh, PBS and Thomas Bow Mr Wilen adds: “In the past nine months, the underlying value of infrastructure starts has fallen 22% and this is likely to be, in part, due to a hiatus between the two YORCivil frameworks. “With the new edition up and running, we would expect to see an upturn in infrastructure starts in Yorkshire in the medium term as projects begin to be called off from this framework. “The nature of YORCivil, which has been set up across four regions and in lots, should see work benefitting all levels of the construction industry in Yorkshire and Humberside.” For contractor’s in God’s Own Country, as Yorkshire is seen by its locals, that upturn is long overdue.