The biggest construction companies in Europe have shifted positions slightly since last year’s league table, but the names remain the same. So why do Vinci, Bouygues and Hochtief always appear at the top of the pile – and streets ahead of UK firms?

Vinci has overtaken fellow French outfit Bouygues as the biggest construction firm in Europe. 2000/01 was a busy period for construction, with a number of mergers and acquisitions and the prospect of more to come as the biggest continue to get bigger. UK firms will have to spend wisely if they want to keep up.

But is biggest best? The Continent thinks so, and there seems to be no end in sight to the domination of the big four – Vinci, Bouygues, Hochtief and Skanska – which continue to pull away from the pack and the UK’s top companies.

The top three in particular are more than just construction firms, compared with the likes of Amec or Bovis Lend Lease, and this diversity is behind their rapid growth to immense size and turnover. These firms now have diverse businesses, ranging from motorway concessions to digital television companies.

Illustrating just how fragmented the UK construction market is, Amec, the UK’s largest firm, stands in seventh place – but is just a third of the size of Vinci. Marcos Hermandez, construction analyst for Merrill Lynch in Spain, believes UK firms have not been as aggressive as their European competitors in growing their concessions businesses and moving internationally.

Hermandez says UK firms have two options if they want to compete with the likes of Vinci and Bouygues. First, grow abroad faster and bigger than they are currently doing and expand their services businesses into sectors such as water. Second, they must push for more consolidation. UK housebuilders have been doing their bit lately, but contractors are reluctant to team up. “A lot of deals stall because there are always egos involved, and the argument of who will run the new company,” Hermandez says.

British firms make their mark in the middle-sized companies sector. Bovis has moved into the top 10 after its merger with Australia’s Lend Lease, and Balfour Beatty is treading water in 17th position. Also featuring in the top 50 are Carillion, Taylor Woodrow, Laing, Mowlem, Kier and Alfred McAlpine. UK companies making it into the top 100 are Interserve, HBG, Jarvis, Amey, Morgan Sindall, Miller, Morrison, Galliford Try, Mansell, Shepherd, Birse, Wates and Costain.

But Vinci, Bouygues and Hochtief haven’t had it all their way. Each has been hit by the continuing decline of the German construction market. The bad news is that Germany is not expected to recover any time soon, because it is faced with the double whammy of low demand and excess supply. The poor performance of the German economy means that new projects have dried up and housing demand has slumped. This is compounded by too many firms competing for the limited work and pushing down prices.

Meanwhile, Skanska’s ambitious plans for international growth have been reined back. It has been hardest hit in Poland and Eastern Europe, and has had its fair share of troubles in the UK – mainly in joint ventures with Costain. Despite slipping back to fourth place, Skanska is still nearly twice the size of Amec.

Opposite, Building profiles the “big three” and examines their UK presence and, on the following 10 pages, lists the top 300 contractors and 200 materials producers in Europe, ranked by turnover.

Vinci

Vinci, the world’s biggest construction firm, operates in more than 100 countries. It also has the largest UK interest of the top three European companies through its subsidiary Norwest Holst, which itself turns over more than £400m a year. Watford-based Norwest Holst holds itself up as role model for medium-size contractors, and last year posted a record pre-tax profit of £15.8m. Like Hochtief and Bouygues, Vinci is unlikely to pop up to buy another major UK contractor, but more likely to front a PFI bid. Vinci sees the UK PFI market as rich pickings, and has more than enough cash behind it to put up substantial equity stakes. Vinci also likes to get its teeth into motorway and service concessions. Half its value is in concessions, including the lucrative Cotiroute motorway network covering 900 km around Paris and central France. Thanks to these concessions, Vinci is the star performer among construction groups and has a solid financial base. Profit is expected to jump 20% in 2001, despite sales growth remaining relatively flat this year. Cost savings of *100m are just starting to come through after the firm’s 2000 merger with French contractor GTM. But one worry that the firm does have to contend with is the fact that 12-13% of its business is in Germany. Antoine Zacharias, chairman and chief executive: Became general manager and joined the board in 1991. Was appointed chairman in June 1997.

Bouygues

The fact that Bouygues, which started contracting in Paris in the 1950s, is no longer considered a contractor by the stock market illustrates the shift in emphasis the group has experienced over the last decade. The vast bulk of its value as a company lies in its telecoms businesses and Bouygues is now considered a telecoms group that happens to do a bit of construction. It owns a number of television stations, including Eurosport and the French TF2. Despite this, Bouygues still keeps a presence in the UK construction market, mainly through PFI. It even had a sniff at Laing and was believed to be fighting it out with O’Rourke to become preferred bidder. And it was was also linked to Wembley in 2000. More than half its construction turnover is outside France, with operations in 80 countries and major contracts in Africa, Asia, Eastern Europe and Australia. Bouygues also owns Colos, the world’s largest roadworks group. In France, Bouygues has worked on the Stade de France and the French National Library in Paris. Martin Bouygues, chairman and chief executive: Took over from father and founder of the group Francis Bouygues in 1989. Has overseen the expansion of Bouygues’ international construction businesses, the growth into services and its telecoms focus.

Hochtief

Hochtief is clinging tightly to the number three spot. Despite its comfortable rise to this position, the German giant has been hit by a series of spectacular losses as its home market continues to disintegrate. Late last year, Hochtief revealed a £36m loss for the nine months to 30 September and said profit for 2001 would be well down on 2000. Hochtief has been desperately trying to lower its exposure in Germany, where it currently has 20% of its business, and grow internationally. The company has been buying stakes in airports around Europe, including Dusseldorf, Hamburg and Athens, and it has a 50% stake in Australian contractor Leighton. But worryingly, given the fallout of 11 September, it also has major interests in the USA through its subsidiary Turner Construction. Hochtief’s troubles appear to have forced it to stall plans to increase its UK presence from its current £100m-a-year business where it features in a number of PFI bids. After losing the race to snap up Bovis to Australian firm Lend Lease, Hochtief was widely tipped to go after another big UK name. Analysts say this is unlikely to happen, however, while Hochtief struggles in its existing markets. Hans-Peter Keitel, chairman and chief executive: Has streamlined the group’s management board from seven to four members after setting up Hochtief’s construction and civil engineering business as a separate legal entity last year.

Methodology and key for tables

This ranking was compiled by Building’s French sister publication Le Moniteur with the assistance of Laurence Francqueville (France), Jacqueline McLaurin (UK), Martin Hewes for Building (UK), Marcel Linden (Germany), Brigitte de Wolf (Belgium), Jacques Ramon (Spain), Aldo Norsa (Italy), Catherine Thomas (Portugal), Guy de Faramond (Scandinavia), Costruire (Italy), Ambassades de France (Austria, Swizterland, Greece), Euroconstruct, FIEC, Confédération Construction, Construction Forecasting and Research and the DTLR. Profit and turnover figures have been converted from euros using the most recent available exchange rate: £1 = *1.641. * Subsidiary of company already listed
** Before sale to O’Rourke
*** Combined turnover after merger
† Before merger with Corsan
†† Before merger with Endel

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