2005: A landmark year

Well, this was the year when those debates suddenly became less theoretical: one after another, major contractors such as Alfred McAlpine, Mowlem and Multiplex shuffled along to the stock exchange to announce profit warnings, writedowns and losses on contracts. Others, such as Gleeson and Kajima UK, prepared to bale out of the business altogether.

And now, in the past few weeks, events have taken a more positive turn. For as long as anyone can remember, it has been suggested that restructuring and consolidation is vital to making the sector more efficient; in retrospect, it may become clear that 2005 was the year in which that finally got under way. The mighty Amec is breaking into two, Mowlem is betrothed to Carillion, but may be wooed by Balfour Beatty, PFI specialist John Laing is a reluctant takeover target, and even as we go to press, AWG is rumoured to have put Morrison up for sale. None of these deals or developments has quite the audacity of the Wimpey–Tarmac asset swap, or the sheer bravado of the Laing O’Rourke deal, but taken collectively it adds up to a serious restructuring of the industry.

There are two main economic forces driving contractors together. Mowlem was attractive because its contract losses made it more affordable, but its principal attraction was its PFI assets. The City now recognises just how valuable these projects can be over their lifetimes. And second, clients are increasingly awarding packaged megadeals, which requires contractors to have big balance sheets to take on.

So are we about to see a massive move to consolidation? There’s little doubt that this is happening in the housebuilding sector, and even among consultants, both of which have also seen a bumper crop of deals this year. But when it comes to contracting, we should add a caveat: this is tricky due-diligence terrain. The impending court case between AWG and Fraser Morrison is a timely reminder of this, and one that Balfour should bear in mind – as should anyone else who may get carried away by bargains in the new year sales.

I’d just like to thank …

This has been a great year for us at Building, and that’s down to you, our readers. So, thanks to all who took part in Taylor Nelson’s opinion poll, which showed that Building had extended its lead as the best read and most useful magazine in our sector. Thanks to all of you who bought your own copy – this year was a record for subscriptions – and thanks to all who advertised. I also want to say a special thank you to all who’ve helped us to produce sparkling features copy and up-to-the-minute news stories, to those who supported our successful Reform the Regs campaign, of which there’ll be more in the new year, to everyone who’s written us a letter, and finally a big thanks for all those terrifying health and safety photos – of which you’ll find eight. We’ll be back on 6 January. In the meantime, have a happy Christmas and prosperous new year.