‘The contracting model needs to change’ – Permasteelisa’s boss on why the industry can’t go on like this

Liam Cummins’ last three bosses read like a roll-call of chief executives in the contracting industry.

There was John Gains, knighted in 2003, who was in charge of Mowlem for nine years before leaving at the end of 2004. Cummins had already departed – for Laing O’Rourke – by the time Mowlem, then listed on the Stock Exchange, was bought for £290m by Carillion in 2006. Imagine that now.

Cummins was at Mowlem for six years, then stayed with Ray O’Rourke for 17 years, initially as boss of Crown House and later at its building arm working on schemes such as the Cheesegrater and the Ascot racecourse redevelopment.

He joined Kier in early 2020 to head up its construction business, having been recruited by Andrew Davies a few months into a turnaround at the business. At Kier’s most recent set of results earlier this month, Davies was confident enough to say the turnaround had been completed.

Cummins was at Kier for nearly three years before the chance to become a chief executive in his own right came along, this time heading up the cladding specialist Permasteelisa, the Italian facades company which celebrated its half-century in business last year. He started at the beginning of last year.

“I had three very different, very strong leaders,” Cummins, who turns 54 this week, says of Gains, O’Rourke and Davies. “I hope the CEOs of those businesses would say I made a difference.”

Of his move to the top rung, he adds: “I felt I was ready to transition into a chief executive role. It’s different to having a division. You have less of an impact as an expert practitioner but you have a massive impact on picking the right people and starting to build teams.”

He left school at 16 and began work at Gleeds as a trainee QS, starting a degree in it two years later. “They said, ‘would you like to go to university and we’ll sponsor you’. I was their first ever sponsored student.”

He completed his course at Kingston, then stayed at Gleeds a bit longer before he went off to Serco as a project manager. “Private practice was a bit suffocating. I liked the operational side of life. [Serco] were looking for project managers and I had five years with them,” he adds.

Cummins credits his QS and contracting background for landing him the job at Permasteelisa, a company with 2,900 employees, 23 locations around the world and a turnover of €790m (£665m). “It’s been good to get exposure to these different environments.”

Since 2020, Permasteelisa has been owned by a US private equity firm called Atlas Holdings, which is based in Connecticut but has an office at St James’s Square in London’s Mayfair.

There was a big cultural difference between Mowlem and Laing O’Rourke. The pace at O’Rourke was faster

“It might be different culturally, but it’s the same set of drivers,” Cummins says of being owned by private equity. “[Atlas] like construction – this is very much a core kind of business for what they want.”

He adds: “There was a big cultural difference between Mowlem and Laing O’Rourke. The pace at O’Rourke was faster. Everybody was focused on operations, not servicing some of the things you have in a listed environment.”

Since arriving at Permasteelisa 20 months ago, Cummins has set about focusing on certain markets and pulling out of others. He says the US, where it has traditionally concentrated on east coast cities such as New York and Boston and those on the west like San Francisco, has suffered from a fall in numbers of people returning to the office after the pandemic.

But, while it is seeing less demand for new offices in its traditional markets, the company has seen an uptick in sectors such as hospitals, universities and stadia and in new places like Texas and Florida.

The firm has pulled out of China, with Cummins admitting that it was “very difficult to compete with local companies”. The firm has also trimmed the amount of work it does in Australia.

The Middle East has, he says, an appetite for “new and complex” projects. But Cummins adds: “I lived in the Middle East [Dubai, when he headed Laing O’Rourke’s business out there] and you have to pay a lot of attention to cashflow.”

I want the business to do great things in London – it is a super opportunity for us and I want the business to be operationally strong here

In other words, if the firm has any doubts about being paid, it won’t be doing the job.

There is however one place that Cummins is especially keen on. “London is our biggest single market. We have increased our capacity in London.

“I want the business to do great things in London – it is a super opportunity for us and I want the business to be operationally strong here.”

A look at the list of projects it has worked on in the capital in the past few decades reads like a who’s who of schemes. Name a job in London and there is a good chance Permasteelisa has worked on it: Wembley stadium, the Shard – incidentally, Cummins’ favourite building in London – Heron tower, Spurs stadium, the National Gallery.

To give an idea of how important London is to Permasteelisa, Cummins says that 70% of its European business is in the city. The firm typically has around 75 schemes going on at any one time across the globe and, right now, 23 of these are in London.

“The biggest single cluster of projects in the world is in London,” Cummins adds. “We need to be inside the ecosystem of London.

“Getting London performing well is very important to me. It’s fundamental we have a strong capability here.”

Permasteelisa has around 100 staff in the capital, mainly based in Cannon Street in the City. Cummins says the city remains ahead of most of its peers because of the “level of investment, the appetite to build and the visibility of pipeline.

“London is seen [by investors] as a good long-term option. We see a lot of opportunities.”

When he was living overseas while at O’Rourke – he spent a decade in Dubai and Perth in Australia – Cummins says London remained his favourite city. “The quality of life in Perth was great,” he says, “but from an all-round business vibrancy, I always missed London when I was away.

“It has an energy, a pace and diversity. There is a lot going on.”

One thing that concerns him is the question of who will build all these schemes planned for the capital. “There’s going to be more work than capacity,” he says.

The list of tier 1 contractors able – or more pertinently willing – to do the kind of high-risk jobs for the same old margins is getting smaller. 

“Something will have to change in the [contracting] model and risk appetite,” Cummins says. I’ve had conversations with investors questioning what the next model is for the next wave of work.

The sector is stressed and margins are unsustainable at 2% to 3%. Everybody knows that. And it’s not just margins – we’ve seen so many insolvencies in the sector

“How do we get the best out of the sector? To do that, there will have to be a shift because there will be more work than capacity and therefore there will have to be a conversation about what the delivery model will look like.”

Cummins is speaking just after one of his old firms, Laing O’Rourke, released its latest annual report. A turnover of £4.3bn and a pre-tax profit of £18m, means its margin is next to nothing. A few days later, the collapse of ISG strengthens the point as the pool of contractors gets even smaller. 

“It has to change,” Cummins says. “The sector is stressed and margins are unsustainable at 2% to 3%. Everybody knows that. And it’s not just margins – we’ve seen so many insolvencies in the sector.”

He says the current contracting model simply acts as an accelerant in a race to the bottom. “When I look at the most successful projects I’ve been involved with, there is a clarity in what everyone needs to get done. There’s a transparency in how you’re working and proper collaboration.”

Bringing specialists in earlier would be one way to help, he says, while the industry is “still screaming for transformation on productivity”. He thinks some firms are trying with new technology, but adds: “I wonder if some firms have invested money but the delivery model has suffocated their ability to leverage that.

“Clients need to be prepared to challenge the traditional model. It’s a pivotal time for leaders in government and industry to stand back and look at this now. We’re in a window of being able to impact this.”

More clients are asking to see the strength of firms’ balance sheets. “That’s a big focus,” he says.

“One of the first questions we’re asked, as well as about capability, is, ‘let’s understand the strength of your balance sheet’.

“We have no debt. In a stressed market, that becomes a big differentiator. Clients want to look inside the engine room and be confident in the strength of your balance sheet.”

And he says it is wrong to describe contractors as risk averse. “Risk averse is being incredibly sensible about the long-term business. I know what I’m looking for from a partner and what they’re looking from us: it’s a sensible alignment on risk.”