Laing O’Rourke up close

It has now been a decade and a half since then-concrete boss Ray O’Rourke pulled off what is still the biggest M&A coup in construction, carrying out the reverse takeover of Laing’s construction business for £1. Since then, fascination within the sector over Laing O’Rourke’s operations has only deepened. So, too, has the irony in such a level of scrutiny being placed on this most private of privately owned contractors.

The intense interest in goings-on at Laing O’Rourke is to some extent an inevitable consequence of the firm’s sheer scale. The company is the UK’s largest privately owned contractor, with a turnover of £3.5bn, and ranks in the top three largest contractors in the country overall. This places it firmly, and permanently, on the radar of potential suppliers and project partners alike.

Scrutiny on Laing O’Rourke is exacerbated by its private ownership - which makes updates from its boardroom far less routine than those of its listed rivals - and in particular because its bosses use that private status fiercely to guard details of the business’ performance. This contrasts with companies such as Wates, which even though they remain in private hands are gradually operating much more like listed companies in terms of publicity. For these reasons, similar intrigue surrounds Sir Robert McAlpine, particularly in light of a recent run of difficulties that this week saw it post a loss in excess of £50m for the second year in a row.

Yet there is something about Laing O’Rourke in particular that means the company captures more than its share of attention. It’s partly the enduring story of a multi-billion pound company created by a former labourer from County Mayo, which shook apart the industry’s hierarchy at its foundations. But it’s also to a large degree the company’s reputation for continuing to shake the industry’s ways of doing business - first, by a commitment to directly employing thousands of workers, and, in recent years, its unwavering pursuit of off-site construction methods.

Ray O’Rourke has famously evangelised the merits of off-site methods - or, in Laing O’Rourke speak, design for manufacture and assembly - since the late 2000s, when his company invested £100m in a huge factory in Steetley, Derbyshire that was widely seen as ahead of its time. But, after two troubled years at the contractor - culminating in its European business posting a £57.5m loss last year, its £1.5bn-turnover Australian arm being put up for sale, and a raft of senior management changes - questions are now being raised over its business strategy; and its dogmatic commitment to off-site methods of construction is at the heart of that scrutiny.

Yet there is something about Laing O’Rourke in particular that means the company captures more than its share of attention

The questions surrounding Laing O’Rourke’s continued betting on the success of off-site techniques have stemmed partly from a £61.2m hit in its last accounts that the firm blamed on three off-site jobs. The official explanation, that the projects had to be “substantially redesigned in order to demonstrate the benefits of design for manufacture and assembly”, has only added to concern that the company is attempting to push its clients down an off-site route even when they do not feel it’s appropriate.

This is troubling from the perspective of Laing O’Rourke’s medium-term business outlook, despite the company’s reported £9.5bn order book. But the extent to which the contractor appears to be having to sweat to convince clients to adopt an off-site approach also raises broader questions over clients’ readiness to embrace such methods on a scale that makes contractors’ investment in them viable.

It has always been acknowledged that Laing O’Rourke was operating ahead of the market with its off-site push. But there’s ahead of the market, and then there’s purely speculative investment. And the fact that, as we reveal this week, Ray O’Rourke has put planned investment in a second off-site facility under review is the clearest sign yet that the company itself may be starting to question whether widespread demand for its services really is yet visible on the horizon.

There are no shortage of industry grandees who will line up on conference platforms to espouse the benefits of off-site construction as the logical future of the sector, with arguments that in an academic sense absolutely stack up.

But if Ray O’Rourke - charismatic, forceful, and with a reputation for business foresight unmatched in the sector - cannot convince clients, pens poised over contracts, to adopt the technique on a scale that actually makes it viable, you do have to ask - who will? As it stands, the answer appears as elusive as Laing O’Rourke’s founding father himself.

Sarah Richardson, editor