UK Construction Industry Overview

A Corporate Profile

By Corporate Watch UK
Completed March 2004

UK Construction Industry Overview

The UK’s construction industry has been enjoying a period of strong growth, with the infrastructure and the commercial construction sectors at the forefront of this trend.1 The annual round of results published by construction firms in March 2003 showed that the sector is shifting away from one-off contracts carrying high risks and big returns toward lower risk long-term deals that go beyond construction to designing, maintaining and operating buildings.2 The Private Finance Initiative in other words.

Private Finance Initiative

This is the government’s favourite way of funding major new public building projects such as hospitals, schools, prisons and roads. Private consortiums, usually involving large construction firms, are contracted to both design and build a new project, and also to manage it. The contracts typically last for 30 years. The building is not publicly owned but leased by a public authority, such as a council or health trust, from the private consortium.

The private consortium raises the cash to build the project. It is then paid back with interest by the government through regular payments over the period of the contract. As with any form of hire purchase, buying something on tick is more expensive than paying for it up front. The Edinburgh Royal Infirmary is often cited as an example of how expensive the PFI can be. It cost £180m to build and will cost £900m to pay for. Unions are opposed to PFI as they claim that one of the main ways that private companies profit from the PFI is by staffing the buildings as cheaply as possible. The pay and conditions of front line workers in PFI buildings is typically worse than their counterparts in the public sector3.

Since the advent of PFI, the construction industry has found itself on much more stable ground. Between 2001 and 2002, its output is estimated to have increased by 9.7%.4 According to lobbyists, the Major Contractors Group (MCG) (see Key Trade Associations), which represents UK firms such as Carillion (formerly part of Tarmac), Costain and Amec, construction companies engaged in the private finance initiative expect to make between three and ten times as much money as they do on traditional contracts.

Bill Tallis, the director of MCG, said construction firms traditionally received rates of return of 1.5% to 2% on contracts but were now expecting margins of 7.5% to 15% on PFI building schemes. The high profit available to investors in PFI schemes explains why John Laing PLC has sold off its basic construction company and bought up stakes held in such projects by hard-pressed Amey PLC.5

This strategy is reinforced by figures from the European Construction Industry Federation (ECIF), which show that the UK construction sector grew by over 8% last year while its counterpart in Germany and France slumped by 2.5% and 0.7% respectively.6

The UK government defends PFI by its use of something called the ‘public sector comparator’. This shows whether or not privately financed schemes offer better value for money than conventional funding. The main problem with this is that the government has provided an accounting device called ‘risk costing’ which has meant that private firms generally emerge as winners. When a consortium of private companies agrees to build something for a public body, it acquires the risk that the project might fail. This risk is ‘costed’ and becomes a key component of the value-for-money calculations. Unfortunately, according to the Association of Chartered Certified Accountants (ACCA), this is often exaggerated.

For example, the average cost over-run on public hospital building projects is 7%. The private operators are allowed to claim a ‘risk’ of 12.5%. By contrast, no risk costing whatsoever is added to the public sector comparator. This led Jeremy Colman, the auditor-general at the national audit office, to proclaim that some of the comparators being used are ‘utter rubbish’ and ‘utterly irrelevant’.7 While the UK Treasury will not agree any scheme that does not beat the public sector comparator it admits that the government is reviewing this model of calculating value.

Sectors

Housebuilding accounted for 38.6% of the construction industry’s output in 2000.8 The amount spent on public housing has never exceeded £2bn whereas the figure for private housing has consistently been double or triple that amount.9

New homes are currently exempt from the Sale of Goods Act. Each year there are 150,000 homes purchased throughout the UK. With an average value of £100,000 per property this means that an industry worth in excess of £1.5bn per year is unregulated by the government and exempt from usual trading standards, leaving owners of new homes with little or no protection for the most expensive purchase they will ever make. This is made even more concerning by the fact that 84% of new homes have defects.10

Housebuilding output is forecast to increase by 19% at constant 1995 prices between 2001 and 2005.11

Infrastructure accounted for 9.2% of all construction work in 2000 – a slightly lower figure than for the previous 4 years – and was worth £6.43bn. Road building is the main source of infrastructure work.12

The National Audit Office revealed that more than £434m worth of road-construction contracts – 51% of those awarded – were won by five firms, Balfour Beatty, Budge, Fairclough, Alfred McAlpine and Tarmac.13

Industrial construction is the smallest of the basic sectors of the whole construction industry. In 2000, the output of private construction work was £3.7bn, or 5.3% of the total construction sector.14

Commercial construction output, which includes a wide variety of commerical work, accounted for just over 18% of all construction work in 2000.15

Building materials embrace a wide range of materials and components such as bricks, tiles, cement and timber. The UK construction materials sector is undergoing a period of rationalisation, with many UK companies now forming part of international companies. The UK building materials market is forecast to increase by 13.7% at current prices between 2001 and 2005.16

Economic Importance

The UK construction industry provides a tenth of the UK’s gross domestic product, employs 1.4 million people and is worth around £65 bn per annum.17 With an output of £81.9bn in 2002,18 the UK construction industry is ranked in the global top ten.19

In 2002, 6.7% of construction firms went bankrupt compared with 14.6% in 1992.20

Safety

Compared with all other industries – who had 110 deaths per 100,000 employees – the construction industry had 338 employees die on the job in 2002.21

In the City of London alone, these include; being crushed by a 500 gallon drum, entering an unlit room which was actually a ventilation shaft and falling down it, falling from a height where a guard rail had been removed, being hit by a 20 foot scaffold pole, falling after a cradle used for cleaning windows collapsed… all resulting in a verdict of accidental death.22

Equality

Gender equality in the construction industry has actually worsened over a decade. In 1992, there were 184,000 women and 1,662,000 men employed. In 2002, there were still 184,000 women but 1,773,000 men. Of these, the ratio of white employees to non-white was 20:1.23

In terms of builder’s wages, the UK falls behind Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland.24

References 1’Construction Industry Market Review 2003,’ Key Note Publications, 01.01.03. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=34791. Viewed: 19.01.04

2’Unison Companies Update,’ Unison, 09.04.03. See: www.unison.org.uk/acrobat/B798.pdf. Viewed: 26.01.04

3’Q&A: private finance initiative,’ Matt Weaver, The Guardian, 01.10.02. See: http://society.guardian.co.uk/privatefinance/story/0,8150,802670,00.html. Viewed: 09.03.04

4’Construction Industry Market Review 2003,’ Key Note Publications, 01.01.03. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=34791. Viewed: 19.01.04

5’PFI triples profits, say firms,’ Terry Macalister, The Guardian, 08.09.03. See: http://society.guardian.co.uk/privatefinance/story/0,8150,1037400,00.html Viewed: 23.01.04

6’PFI triples profits, say firms,’ Terry Macalister, The Guardian, 08.09.03. See: http://society.guardian.co.uk/privatefinance/story/0,8150,1037400,00.html Viewed: 23.01.04

7’Public fraud initiative,’ George Monbiot, The Guardian, 18.06.04. See: http://society.guardian.co.uk/futureforpublicservices/comment/0,8146,739525,00.html. Viewed: 08.03.04

8’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

9’Construction Statistics Annual 2003, DTI, 01.09.03. See: www.dti.gov.uk/construction/stats/constat2003.pdf. Viewed: 22.01.04

10Inspector Home. See: www.wimpeyrawdeal.co.uk/. Viewed: 22.01.04

11’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

12’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

13’The Great Comic Relief Fraud,’ Special Publications No. 5. See: www.geocities.com/carbonomics/MCsppub/11sp04/11sp04b_f.html. Viewed: 04.02.04

14’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

15’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

16’UK Construction Industry Market Review,’ Key Note Publications, 01.08.01. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=3921. Viewed: 19.01.04

17’Building, Construction and Property Services,’ DTI. See: www.dti.gov.uk/sectors_building.html. Viewed: 19.01.04

18’Construction Industry Market Review 2003,’ Key Note Publications, 01.01.03. See: www.researchandmarkets.com/reportinfo.asp?cat_id=0&report_id=34791. Viewed: 19.01.04

19’Construction and Fraud,’ Tom Crowley, 01.03.03. See: www.maxima-group.com/a-0509.shtml. Viewed: 19.01.04

20Construction Statistics Annual 2003,’ DTI. See: www.dti.gov.uk/construction/stats/constat2003.pdf. Viewed: 19.01.04

21’Construction Statistics Annual 2003,’ DTI. See: www.dti.gov.uk/construction/stats/constat2003.pdf. Viewed: 19.01.04

22’Construction workers killed in the City of London,’ London Hazards Centre, 28.04.03. See: www.lhc.org.uk/kaw/kawdate.htm. Viewed: 29.01.04

23’Construction Statistics Annual 2003,’ DTI. See: www.dti.gov.uk/construction/stats/constat2003.pdf. Viewed: 19.01.04

24’Construction Statistics Annual 2003,’ DTI. See: www.dti.gov.uk/construction/stats/constat2003.pdf. Viewed: 19.01.04

Major Players

Tarmac

Tarmac was invented when county surveyor, E. Purnell Hooley was passing a tarworks in 1901 and saw that a barrel of tar had spilled on the roadway and, in an attempt to reduce the mess, gravel had been dumped on top of it. The area was remarkably dust-free compared to the surrounding road, and it inspired Hooley to develop and patent Tarmac in Britain. He called his company Tar Macadam (Purnell Hooley’s Patent) Syndicate Limited. Due to general incompetence, his company was soon bought out by the Wolverhampton MP, Sir Alfred Hickman, the owner of a steelworks which produced large quantities of waste slag. The Tarmac company was relaunched in 1905, and became an immediate success.26

In 1986 Tarmac went on a spending spree, first acquiring Aquaseal, a waterproofing and roofing products business, from BP; Hawkins Tiles; chemical company, Sevalco; Innes Lee Industries; Situsec, a family-owned asphalt supplier; and Moffatts, an aggregates company.27

During the 1980s, Tarmac donated more than £300,000 to the Conservative party and in return received nearly £250 million in cash and guarantees from ministers to take over the projects division of the privatised Property Services Agency.28

In 1996, George Wimpey Plc acquired McLean Homes from Tarmac, in return selling Tarmac its construction and quarrying businesses.29 In 1999, the Tarmac Board announced that Tarmac’s construction and services business was strong enough to trade independently. It was demerged from Tarmac and launched on the London Stock Exchange under the name Carillion plc.30

In September 2000, natural resources giant Anglo American, acquired Tarmac for £1.2bn. However, to please the Department of Trade & Industry and avoid having its acquisition of Tarmac referred to the Competition Commission, Anglo American sold 14 Tarmac businesses to another construction company called Hanson for £32.9m.31

In what must have been a joy for residents of the Spanish Mediterranean coast, Tarmac became its largest ready-mixed concrete supplier in 2002 when it bought the Spanish Mavike Group for $55million.32 Tarmac also joined up with Group 4 to build HMP Lectors in Liverpool. Built under PFI, the companies had recovered their costs within two years. This gives another 23 years of profit and makes the prison one of the most profitable contracts with the government for any company.33

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Carillion

In 1999 Tarmac created Carillion as a seperate company. Three years later Carillion’s margins had risen 25%, making it a leader in road and rail contracting. Government contracts provided 60% of turnover. Carillion’s 16 PFI contracts were worth about £130m and the forward order book reached £5bn.34

In 2000, Carillion made £41.9 million profit.35 It is another long-time Tory backer that benefited from the rail sell-off. Like other rail privateers, Carillion has sacrificed safety for profit. In the wake of the Hatfield crash, the News of the World revealed a memo from Carillion subsidiary GT Rail Maintenance telling line testers to relax the rules on dents and cracks in the track:

‘We are currently being inundated with defects of this kind…however it is not practical or cost-effective to cut all of them out of the track immediately when some of them can afford to wait until they are re-tested.’36

In 2003 Carillion lost £10m over its delays in the construction of the Nottingham light rail scheme and then had most of its rail maintenance work taken away (the shares plunged 16% as about £15m was removed from Carillion’s 2005 operating profits in one fell swoop)37 as the Government tried to save face over the series of rail disasters by allowing the not-for-profit Network Rail to take maintenance in-house.

Despite Network Rail announcing that it would use its own staff rather than sub-contractors, Carillion was happy to find itself with £6bn to upgrade a main line in Cumbria, England. Unfortunately, months later, an unmanned runaway wagon careered three miles down a steep track where ten men were repairing track – killing four and hospitalising three. The wagon’s brakes weren’t working so it was secured by small pieces of wood despite carrying hugely heavy rails. The incident raised doubts as to Carillion’s proclamation that:

‘safety comes first and foremost for the public, the users of the railway and the staff and sub contractors who work on it. Everyone involved in the Carillion Rail structure is to ensure that we all keep that in mind, and remember “If it isn’t safe then don’t do it”.’38

Carillion also had the honour of being awarded the first hospital PFI contract at Dartford and Gravesham General Hospital where it successfully cut beds from 451 to 400. The National Audit Office found that there had been no competition in awarding the contract – only Carillion had tendered – and the NHS Trust had considered the bid on incorrect figures. As a result the official financial watchdog concluded that ‘there is uncertainty as to the level of savings, if any, that will be achieved’.39

New Labour ignored the lessons of Dartford and has given Carillion more hospitals to play with. For its part Carillion adapted to the new government, stopping donations to the Tories and hiring lobbying firm Shandwick. Shandwick in turn hired Colin Byrne, a former Labour party press officer and sidekick of Mandelson. In 2004, Carillion is selling its equity interest in the Darent Valley hospital PFI project thus raking in an £11m profit on a £4.1m investment. It expects its PFI portfolio to contribute £350m to next year’s sales of about £2bn.40 Hospitals and road PFI work remains strong and Carillion is preferred bidder on six projects. Earnings are expected to rise by nearly 10% this year and next.41

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Alfred McAlpine

London-based McAlpine employs around 8,000 people and had sales in 2002 of £768m.42 Since selling its homes business to Wimpey in 2001, McAlpine has spent £23.4m on buying back its own shares. It has changed its focus to public sector construction work and derives two-thirds of its revenues from the ensuing support services.43

McAlpine is now involved in a range of major projects, including government and road building work, while its infrastructure services division carries out work on behalf of UK utilities, including National Grid Transco.44 One of its most recent contract wins was a £100m share in maintaining and refurbishishing 120 properties owned by the Ministry of Defence in south west England.

In 1987, a consortium including Mowlem, McAlpine and the Corrections Corporation of America (CCA is the US’s first and largest provider of detention and corrections services to governmental agencies)45 formed UK Detention Services (UKDS). UKDS run HMP Forest Bank, one of the worst prisons in England in terms of violence and drug use. McAlpine sold its shares in this in 1997.

UKDS also ran HMP Blakenhurst prison in the West Midlands. Company accounts for the year ended 31 December 1995 showed a pre-tax profit of £540,891.46 In 1997, McAlpine sold its 50% share to CCA. In 2001, the prison was taken back into the public sector. In 2003 it was revealed that McAlpine lost out on the contract to build the Scottish parliament due to Sir Robert McAlpine’s donation of money to the Conservative Party.47

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AMEC

[For pre-2002 info see: https://corporatewatch.org.uk/profiles/amec/amec1.html]

In 2002, AMEC employed 22,964 people and had 1,976 new contracts worldwide.48 It was ranked 19th in the top global construction firms.49 It reported a decline in results during the same year, with turnover of £4.33bn and operating profit of £100.2m. The rail arm is one of the fastest growing aspects of the business50.

In 2002, 60% of AMEC’s turnover was generated outside of the UK. This looks set to rise. As AMEC chief executive, Sir Peter Mason, said prior to the war on Iraq: ‘If there is a war, we might see more work afterwards. We were involved in Kuwait the last time.’51

In 2003, when AMEC announced that it had 99.96% approval for the takeover of the French firm SPIE Batignolles, eyebrows were raised. At the time, SPIE was in the middle of a court case involving bribery allegations in the construction of a controversial dam as part of the Lesotho Highlands Water Project. High ranking officials at the project were imprisoned for taking bribes from multinationals including SPIE and Canada’s Acres International.52

The dam scheme in southern Africa attracted the attention of environmentalists who claimed that 27,000 people and hundreds of subsistence farming households were affected but had not been properly compensated. The project, which was intended to divert water from Lesotho to South Africa, was first conceived during the Apartheid era when South Africa was subject to international sanctions. To avoid the difficulties of international financiers openly aiding the then-apartheid regime, the project’s financial advisers – Chartered WestLB – set up a London-based trust fund through which payments could be laundered.53

AMEC is currently involved in the construction of the Baku-Ceyhan pipeline along with BP. Its responsibility in the project is to build a section through a Georgian national park. The national park produces Borjomi Mineral Water which is Georgia’s largest export.54

It is also part of the consortium working on Britain’s first toll motorway – the Birmingham Northern Relief Road. The consortium expects to receive more than £2bn from people using it. The road will destroy 27 miles of the West Midlands green belt and damage two SSSIs.55 AMEC also has an 11% interest in the Cross Israel Highway Concession.

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Balfour Beatty

One of the UK’s most infamous construction compaines due to its wilful involvement with projects such as the Ilisu dam in Turkey,56 it is also the UK’s second largest and most profitable with a turnover in excess of £2.6 billion. In 2000, the company made £94m profit, £477, 233 of which went to its chief executive, Michael Welton.57 Balfour Beatty is the world’s fifteenth largest construction company and has 28,500 employees in 24 countries.58 In 2002, it had 5,449 new global contracts.59

Balfour Beatty manages many hundreds of projects a year, and has relationships with approximately 10,000 suppliers, and sub-contractors.60 Thanks to PFI, Balfour Beatty announced a rise in sales to £3.44bn during 2002 and PFI now forms 20% of its £5.1bn forward order book.61 It is the UK’s leading PPP/PFI concessionaire/contractor.

In addition to its extensive involvement in rail projects following the privatisation of Britain’s railways in the early 1990s, Balfour Beatty received, along with Tarmac (another major donor to the then-ruling Conservative Party), 49% of all road construction contracts.62

Under its finance director at the time, Ron Henderson (now group finance director at Network Rail but previously with Halliburton, Brown and Root and Arthur Andersen), Balfour Beatty was found responsible for the Heathrow tunnel collapse of 1994. It was fined £1.2 million – at the time the largest ever imposed by the Health and Safety Executive (HSE) fine, after failing to ensure the safety of both its employees and members of the public.

Henderson was also in post when Balfour Beatty caused the Rivenhall rail disaster. The firm was fined £500,000. The judge believed that ‘it was only by the grace of god’ that no passenger train was involved in the crash and deaths were avoided. Henderson had left the firm by the time of the Hatfield disaster where four people died, but he was still on the board. The ultimate cause of all three incidents was cost-cutting – something which Henderson, as finance director, must have been aware of.63

In 1996, Balfour Beatty was banned from bidding for contracts in Singapore following allegations of corruption. It was also involved in the Pergau dam in Malaysia where British aid lubricated arms deals with Malaysia.64

Jeremy Carver, a barrister for Transparency International, said of his dealing with Balfour Beatty:

‘I went to a DTI reception. I was introduced to someone who identified himself as the chairman of a company and we were talking about corruption. He announced with great pride that he personally handed over the cheque to the government minister for the Pergau dam “bribe” in Malaysia.’ Identifying the interlocutor as ‘the chairman of Balfour Beatty’, he continues: ‘The corporate honcho was not confessing, but boasting about the payment which he may have considered not a bribe but just the cost of doing business Malaysian-style.’65

Balfour Beatty was also part of the Lesotho Highland Project Contractors consortium (see section on AMEC). In March 1991, according to Swiss bank records which form the basis of the prosecution’s case, the consortium allegedly paid £585,000 via an intermediary into a Swiss bank account controlled by a Lesothan official. Only one month earlier a building contract was signed, worth £135.66

In March 1994 the consortium allegedly paid another £200,000 to the official’s account. Two weeks later, they signed the contract to build another dam, worth £41m.67

In 1999, four year-old Bobby Wood was electrocuted after gaining access to live rail in Strood, Kent. The HSE alleged that Balfour Beatty and Network Rail had failed to ensure that a gate giving access to the line was secure. After pleading guilty, they were fined a total of £300,000.68

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Costain Group

Costain is one of the fifty subsidiaries of Skanska, Scandinavia’s largest construction group which ranks 3rd in the top 225 global contractors.69 Costain dates back to 1865 when Richard Costain founded the original construction business.

Costain’s website laments that:

‘countries that aren’t as lucky as we are… suffer natural disasters and wars’. But guess what? ‘The construction industry can help them rebuild their lives AND THEIR HOMES!’70

In fact, Costain wants to help so much that it recently recommended bypassing the UN to obtain reconstruction contracts in Iraq. Its chief executive, Stuart Doughty, said it didn’t want to compete under World Bank tendering because it would push prices down and slow the award of contract.

‘If you go down the UN route, that means you go to the world to get the best price… [which is not only] political dynamite, but morally awful… Let’s ensure that those who have been violently against this conflict don’t share in the reconstruction.’71

Seven years ago, Costain nearly went bankrupt and was forced to dispose of its last non-core businesses to concentrate on its engineering and construction businesses. Its overall turnover had decreased to £392m which was just a quarter of the value generated in 1990. There was a change in the ownership structure that became mainly Malaysian and led in turn to more restructuring and the sacking of employees. It was at this time that Skanska acquired a 7.6% stake in the company with the option to increase it to 40% over the next three years. 1999 saw Costain appointed its second non-executive director from Skanska. The two companies now have a joint venture agreement to bid for major projects worldwide.72

In 2002 there was a 30% increase in pre-tax profit to £11.3m on turnover of £543.4m. The firm has shifted away from dependency on large one-off contracts, but has not followed much of the rest of the industry into facilities management.73

In January 1996, a consortium led by Costain and Securicor won the contract to design, construct, finance and operate the 800 person Parc prison in South Wales – the first PFI prison contract in the UK. Securicor had no previous experience of running prisons, and ran into what a Parliamentary Select Committee described as ‘operational difficulties’ when the prison opened.74

In June 1996 Costain won the contract to build the $150 million Newbury by-pass in the UK. The construction of the road faced probably Britain’s largest ever environmental protests, resulting in around 1,000 arrests. Most recently, it has been involved in an attempt to fell hundreds of trees to make way for a £30 million, two mile stretch of feeder road for the expanding General Dynamic company in Blackwood, South Wales.75 One of the many nice products parent company General Dynamic produces is the unguided Advanced Precision Kill Weapon System.76

Under previous chief executive, John Armitt (who’s now Chief Executive of Network Rail), Costain were repeatedly fined by the HSE. First, £7,500 for dropping steel sections onto the road below the Avonmouth bridge in 1999. Five months later four workmen on the same bridge plunged to their deaths when Costain’s gantry collapsed, leading to a £250,000 fine. The HSE again fined the firm, this time £200,000, after Paul Davies was crushed to death between a thirteen tonne excavator and a concrete wall while building a sewer near Bridgend, South Wales.77

Along with Balfour Beatty, Costain worked on the $300 million Cardiff Bay Barrage – the largest dam in Europe outside of The Netherlands. The completion of the barrage was nine months behind schedule, with $7.5 million cost overruns.78

The major shareholders in Costain are: Daedalus Projects Limited (itself 93% owned by Malaysian company Intria Berhad), private Kuwaiti company Mohammed Abdulmohsin Al-Kharafi & Sons WLL, and Bahrain-based Raymond International WLL.79

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John Laing

Laing Homes is in the top ten of UK housebuilders and manages more than 1,000 tenders a year.80 In 2002 it announced a pre-tax loss of £18.6m on turnover of £559.3m. Profits were hit by a £38.3m exceptional charge for writing down the value of assets and losses on disposals, while revenue was cut by half due to the sale of the firm’s housebuilding division.81

Like most construction companies Laing has a ‘group strategy of exiting from construction’ in favour of PFI.82 Laing Roads, part of John Laing Plc recently won a £120 million public and street lighting contract for Wakefield Metropolitan District Council. This follows its award of the Walsall street lighting contract in March 2002, and has led it to become the leader in PPP/PFI infrastructure projects.83 PFI specialist subsidiary, Laing Investments, made a pre-tax profit of £14.9m and expects to add a further £3m to the figure as a result of the eight PFI projects acquired from Amey.84

In allowing Laing to take these PFI projects, local authorities have obviously ignored Laing’s previous PFI work on the Manchester Metrolink. In 2001, Altram Manchester, created by Laing, Serco and the 3i Group, manged to lose an extra 54% (£5.96m) on the previous year.85

Altram’s accounts, which show that the company has breached the terms of its banking covenants, were initially due to be filed in October 2002 but Altram has consistently failed to comply with Companies House deadlines. Altram, which had senior bank loans amounting to more than £59 million at the end of 2001, faced interest charges of almost £7.8 million during 2001, although it made an operating profit of only £1.7 million.86

The Greater Manchester Passenger Transport Executive (GMPTE) is terminating Altram’s running of Metrolink as part of a further extension of the service. It will announce the winner of the new contract in early 2004. Laing is understood to be looking forward to walking away from the project.

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Kier Group

The Kier Group has increased profits each year since joining the stock market in 1996. In the financial year to June 2002, pre-tax profits were £27.3m, with earnings per share of 58.3p. Kier’s main business is its construction division, whose projects include working on the Channel Tunnel rail link, which generates most of its £1.4bn turnover.87

Other divisions include its construction services business, which manages and maintains buildings for large commercial clients and local authorities and is involved in PFI projects, and its homes and property division.

As part of the Highlands Water Venture Consortium, Kier is alleged to have paid a bribe of $733,404 to gain the contract to build the Katse dam in South Africa. So far, none of the multinationals involved in the Highlands Water Project have been prosecuted for paying bribes. The South African minister even allowed the companies to keep their contracts.88

In 1998, Kier won a £1,166,000 contract for the main civil engineering works on the new Damhead Creek power station in Kent. This was despite government attempts to block new gas stations in order protect the coal industry89. It also won contracts for Saltend and Shoreham Power Stations and the contract to build and run the first Scottish hospital under the private finance initiative.

Kier is the main civil contractor involved in the UK’s main nuclear dockyard in Devonport, Plymouth. It most recently managed the seismic upgrading works of dry dock to enable the acceptance of nuclear submarines.90

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Mowlem

In 2002, Mowlem posted a 12% rise in profit to £33.1m from £1.9bn of sales thanks mostly to its support services and rail infrastructure contracts. In 2000, Mowlem made £22.3 million in profit, £110,000 of which went to its top director, Dr. Rolf Stomberg.91

Whilst Mowlem Pall Mall (the cleaning, security and hotel services business acquired for £42.7m in 2001) has been successful, its facilities management arm Mowlem Aqumen has not established new major contracts beyond a £450m deal with HSBC.92

In 1987, a consortium including Mowlem, McAlpine and the Corrections Corporation of America (CCA) formed UK Detention Services. Mowlem sold its shares in July 1996 following a year in which one prison alone (HMP Blakenhurst) saw the death of five inmates.93

In 2001, John Gains, Mowlem’s chief executive, said that attacking PFI had become a ‘dangerous national sport’ and that he feared that PFI could be ‘killed off’.

‘I am very anxious because PFI is not only delivering good quality products efficiently and on time, but it is the only way for the government to fulfil its promises of improving public services.’94

Gains went on to receive a Knighthood in the Queens Birthday Honours List in 2003.95

In 2003, Mowlem formed a partnership with Halliburton subsidiary, Kellogg Brown & Root (see Corporate Watch’s Halliburton profile). The duo were promptly named preferred bidder for a £4bn Ministry of Defence contract to upgrade and provide services to British Army garrisons at Aldershot and around Salisbury Plain. Mowlem appear to have no problem with Kellogg, Brown & Root, which is responsible for such wonders as Guantanamo Bay, saying ‘they are controversial if that’s how you define it’. The duo also won a contract to create a rail link across the desert in Australia from Alice Springs to Darwin.96

In 1999, one subsidiary, Barclay Mowlem Construction, was fined $175,000 after failing to ensure the health and safety of workers on the Redfern railway station in Australia. One worker suffered severe head injuries causing brain damage when struck by an electrical wire from overhead pylons.97

In February 2004, after 18 months of delays which had began causing ‘unquantifiable’ damage to the local economy and public confidence, the Court of Appeal upheld a court order requiring Mowlem to allow another contractor on to the site to finish the £26m development of Bath’s Roman spa project. But first it must must remove what work it has done – i.e. all the existing paint paint from the pools. A spokesman for Mowlem said: ‘We believe that the council’s decision to now issue this instruction, for which we are entitled to be paid extra and given additional time, is the right one.’98

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Taylor Woodrow

Taylor Woodrow was founded 90 years ago by Thomas Wilson. It employs over 7000 people worldwide and its primary business is housebuilding, with 90% of operating profit coming from developing new homes in the UK, and selected markets in North America, Spain and Gibraltar.99

In 2000, the firm made £201.5 million profit.100 In 2002, it reported a 15% rise in pre-tax profits to £233.1m on turnover of 2.22bn. This led to the announcement that it would buy back £50m of its shares.

Its housebuilding sector is the fourth largest in the UK following the £480m acquisition of rival Wilson Connolly in 2003 and £556m acquisition of Bryant Homes. Bryant happily claim that:

‘we have the confidence to put a 10-year National House Building Council warranty plus our own two-year Bryant guarantee on every home we build.’

However, Funnily enough the ‘NHBC Warranty’ is nowhere to be found in the NHBC Buildmark policy that is given to the buyers of their new homes.101

In 2000, a scandal in Ghana erupted over the mysterious payment of 10 billion cedis to Taylor Woodrow subsidiary, Taysec, for ‘refurbishment’ on the Golden Beach Hotels that were nearly or already completed. The initial quote of 3.1 billion cedis as what was needed to finish all works was terminated and re-awarded to Taysec at 10 billion cedis.102

Also in 2000, the contractor was fined £80,000 after 30 tonnes of scaffolding fell from a 12-storey building in central Cardiff due to 70% of the ties that were meant to hold the structure up never being put in place.103 Another scaffolding collapse left 28 year old scaffolder, Stuart Whybrow, dead two days before he was due to marry. The verdict of accidental death wasn’t much comfort to his fiancee.104

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80See: www.buildonline.com/oursolutions/casestudies.asp Viewed: 22.01.04

81’Unison Companies Update,’ Unison, 09.04.03. See: www.unison.org.uk/acrobat/B798.pdf. Viewed: 26.01.04

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84’Unison Companies Update,’ Unison, 09.04.03. See: www.unison.org.uk/acrobat/B798.pdf. Viewed: 26.01.04

85’Manchester PFI tram firm sees losses soar,’ Mark Court, The Times, 04.04.03. See: www.timesonline.co.uk/article/0,,5-633804,00.html. Viewed: 23.01.04

86’Manchester PFI tram firm sees losses soar,’ Mark Court, The Times, 04.04.03. See: www.timesonline.co.uk/article/0,,5-633804,00.html. Viewed: 23.01.04

87’Prudence helps Kier build solid growth,’ Mail On Sunday, 23.02.03. See: http://financialmail.co.uk/20030223/nm59533.html. Viewed: 28.01.04

88’Multinationals free to give bribes – end this scandal.’ See: www.labournet.de/internationales/bribes.html. Viewed: 27.01.04

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90Kier Construction. See: www.kier.co.uk/KierConstruction/project_details.asp %3Fid%3D151+kier+construction+nuclear&hl=en&ie=UTF-8. Viewed: 28.01.04

91’They benefit from privatisation Fat cats who get PFI cream,’ Socialist Worker, 25.08.01. See: www.socialistworker.co.uk/1763/sw176302.htm. Viewed: 29.01.04

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94’Protests could kill PFI,’ Terry Macalister, The Guardian, 01.08.01. See: www.society.guardian.co.uk/privatefinance/story/0,8150,530632,00.html. Viewed: 28.01.04

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97’Builders, rail corp fined over accidents,’ 19.01.04, The Age. See: www.theage.com.au/articles/2004/01/19/1074360684828.html. Viewed: 28.01.04

98’Judge rules against Mowlem in Bath Spa row,’ Contract Journal, 20.02.04. See: www.contractjournal.com/home/Def ault.asp?type=17&liArticleID=40655&liSectionID=12&liDF=1. Viewed: 23.02.04

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102’The ‘Black-hole’ hotels rip-off,’ The Ghanaian Chronicle, 21.08.00. See: www.mclglobal.com/History/Aug2000/21h2000/21h0r.html. Viewed: 29.01.04

103’Scaffold Collapse in Cardiff, U.K.’ 13.12.00. See: www.workcover.vic.gov.au/vwa/home.nsf/pages/so _construction_attach/%24file/Scaffold_Collapse_Cardiff.pdf. Viewed: 29.01.04

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