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Balfour Beatty bolstered by contract wins

December 28th, 2009

Balfour Beatty has been awarded contracts totalling almost £200m to build and maintain schools in London and central Scotland.

The UK’s largest construction and engineering company also said that it was involved in the bidding process for a Building Schools for the Future (BSF) contract worth about £1bn with Hertfordshire education authorities.

Publicly-funded building work has offered a boon to many of the UK’s larger construction companies during the past 18 months, as commercial and residential contracts have dried up.

Balfour, along with a handful of other large-scale, multi-operation construction groups, has been particularly successful at winning BSF and other state-sponsored contracts.

The company, which earlier this year added £1.2bn to its £12.8bn order book following the acquisition of Parsons Brinckerhoff, the US services group, is working on a range of education contracts, worth about £900m.

Competition for this kind of work is relatively low as there are only a few companies big enough to deliver projects on this scale.

As well as providing a healthy and long-term cash flow, building companies are attracted to public sector work, such as schools, hospitals and prisons, as it often comes with the added benefit of a long pipeline of maintenance and facilities management contacts.

However, Balfour warned that there could be tough times ahead as the predicted drop-off in UK public spending takes its toll on some of the larger construction companies, which are heavily dependent on government-funded contracts.

No one really knows what kind of reductions there will be in spending next spring, but it would be wrong to say that everything will stay the same and the cuts won’t effect them.

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