Balfour Beatty’s UK losses continue due to delays on central London projects

Construction giant Balfour Beatty booked a £23 million loss in the UK in the first six months of the year due to problems on a number of central London residential projects.

Bosses said Covid-19-related disruption had taken its toll, with delays in supply chains lengthening project times and increasing costs.

The construction sector was forced to shut for parts of the pandemic lockdowns but has fared better than other sectors.

Pent-up demand has seen the construction sector boom in recent months, but delays to global shipping and an HGV driver shortage in the UK have hiked prices, eating into profits.

As a result of the rising prices and issues in the capital, Balfour Beatty said it would no longer bid for fixed-price residential property projects in central London.

The company also identified it could need to spend up to £50 million on remedial works to a high-rise project in London, completed in early 2016 due to issues with the stone panel facade.

The £23 million pre-tax loss in the first half of 2021 in the UK matched the levels recorded in the same period a year ago but globally the group enjoyed a boost in profitability from the US and its Hong Kong divisions.

Group pre-tax profits in the six months to July 2 hit £35 million, compared with a £26 million pre-tax loss a year earlier, with revenues up to £4.15 billion compared with £4.12 billion previously.

And while losses in the UK continued, the company pointed out revenues grew from £986 million to £1.26 billion thanks to increased work on public sector projects, including the HS2 rail line and Hinkley Point C nuclear plant.

Public sector work now accounts for 90% of Balfour’s business, up from 80% a year ago.

Bosses added they expected to benefit further from public sector infrastructure spending by UK and US governments, including plans by UK ministers to accelerate road improvement projects.

Equity analyst Nicholas Hyett, at Hargreaves Lansdown, said: “Losses on London property construction contracts mean Balfour’s UK construction business has not made any progress year-on-year.

“Given the group was struggling with the complete closure of the construction industry 12 months ago that’s a particularly poor result.

On the company’s decision to quit bidding for fixed-price residential contracts, he added: “That may avoid repeats of past blunders, but it continues a trend of Balfour restricting where it operates.

“So long as there’s enough work to do in its remaining markets that’s no bad thing, but construction is a notoriously fickle business and work quickly dries up when the economy takes a turn for the worse.”