Contractor won £60m job as delivery assurance partner on £2bn scheme
Costain’s chief executive has brushed off the impact of the government’s decision to cancel the £2bn Stonehenge tunnel project and said the firm is “focused on delivering the programme that we’ve got”.
The contractor won a £60m job as delivery assurance partner on the scheme in a joint venture with Mott MacDonald in 2022 but the 3.3km tunnel was mothballed by Labour last month.
Alex Vaughan said the impact of the cancellation on Costain had been “small and manageable” in light of the £4.3bn order book the firm announced this morning in its half year results.
“If you look at the portfolio of customers and work that we’ve got, it’s very small,” he said. “We’re focused on delivering the programme that we’ve got and securing the work in other markets”.
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The highly controversial scheme was originally approved by the government in 2020 but has faced several legal challenges by campaigners, with the latest bid launched last month just two weeks before Labour’s decision to scrap the project.
Vaughan, who has headed up Costain since 2019, admitted the tunnel was a “very challenging project from a stakeholder point of view” but praised the government for making “hard decisions”.
“If you look at the big picture, I think it’s a positive that we’ve got a government that’s making the hard decisions to prioritise ‘right what infrastructure are we going to deliver and what are we not going to deliver?’”
Labour is drawing up a 10-year plan for infrastructure which Vaughan hopes will provide the industry with certainty and put it in a “good place moving forward”.
But the contractor has been hit by the cancellation of parts of HS2 over the past two years including the pause on the central London tunnels running between Old Oak Common and Euston which the firm is due to build in a joint venture with Skanska and Strabag.
Vaughan admitted he did not know when the Euston tunnels would be given the go ahead but said “when they let us know, we’ll get on with it”.
“The important thing is you’ve got to make the decision. What we want is clarity and certainty. So the fact that the decisions might be hard, it’s like any decision that any business makes, you need to make a decision, and then people can get on with it.”
Vaughan said Costain’s biggest growth market over the next few years would be the water sector following a series of frameworks the firm has been appointed to and more than £500m of work in the sector it has been awarded since the end of June.
The firm’s revenue in its natural resources division increased by 10% to £195m in the first half of the year with its operating profit for water, defence and nuclear energy up from £7.5m to £8.4m.
The largest part of its forward order is four ongoing tunnel schemes for HS2 along with a new job on the M60 for National Highways and a hydrogen contract with BP.
Costain saw its revenue slip slightly to £639m in the six months to the end of June compared to £664m in the same period in 2023 but announced a £10m share buyback after reporting increased pre-tax profit of £17m, up from £8.5m.
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