For major contractors the problems of the past few years are only just starting to manifest themselves
As woes at traditionally successful outfits go, this week’s announcement of profit warnings totalling almost £100m from two of construction’s biggest contractors may not quite be the industry equivalent of Brazil’s World Cup humiliation, but it comes close.
Balfour Beatty’s revelation of a £35m shortfall in profit expectations from its M&E business, just four weeks after its last warning to the market, sent the contractor’s share price tumbling by 15% before recovering.
Meanwhile, the news that Royal Bam Group, the Dutch parent company of Bam and Bam Nuttall, will take a £60m hit on a handful of problem jobs, one of which is a UK civils project, was enough of a blow to its board that it launched a £79m cost cutting drive in response (page 10).
Eighteen months ago, the idea that these long-time stars of contracting would be forced into such measures would probably have seemed unthinkable – even in the light of recession. The only aspect that stops this week’s developments having the same shock value as that 7-1 World Cup defeat is the fact that, in Balfour’s case, its fall from grace has been staggered over months – which has, in turn, led to fears for the health of other major players.
Both Balfour and Bam’s troubles are, at least in part, a legacy of the market conditions of the past few years. Balfour’s difficulties have be