Japanese contractor plans to turn to PFI investment after reporting £80m losses on PFI schools contracts

Kajima, the Japanese contractor, is planning to wind down its construction work in the UK and concentrate on PFI investments.

A source close to Kajima said the company’s UK managing director, ex-Jarvis man David Evans, had decided to step back from the sector after the completion of the handful of projects it has already won and is obliged to carry out.

Building revealed in April that the contractor lost £80m on PFI schools contracts, which it then confirmed in its annual results in May. It is expected to reveal more losses associated with its UK PFI contracts when its three-quarterly results are announced next Thursday.

However, the source said Evans’ intention was to change the company into a PFI investor, adopting a similar model to that of Laing, which sold its construction business to Ray O’Rourke for £1 in 2001 and focused on taking stakes in PFI projects.

It is understood that Kajima is part of a consortium bidding for the government’s Building Schools for the Future project in Lewisham, south-east London, but as an equity investor rather than a contractor.

At the time that the £80m losses emerged in April, Kajima said it would be reviewing the structure of the UK business and its selection process over the next year.

A spokesperson for Kajima this week said: “The company has been consolidating its strengths through a process of streamlining, which has involved reinforcing the quality of our teams. In addition, we have already begun a process of being selective about the appropriate size and scope of projects we bid for.

We are fully committed to getting on with the projects in hand

Kajima spokesperson

“We are fully committed to getting on with the projects in hand and working in partnership with our clients. Kajima remains committed to construction and PFI going forward.”

Kajima’s PFI schools portfolio includes the £19m Haverstock school in Camden, north London, Darlington council’s £27m Grouped Schools Project, and Wooldale Centre for Learning in Northampton.

The change in strategy has emerged two weeks after Building revealed that residents of the Joseph Rowntree Foundation’s 46-unit Caspar scheme in Leeds, built by Kajima, have been told to move out because of faults in the building.

A report by consultant Arup for Kajima has recommended that the city-centre site be evacuated in the next three months, as there is a 2% chance that the whole structure will collapse in high winds. Arup’s report also advised that a more detailed structural survey should be undertaken.

Kajima in the UK is a £100m-turnover business, and has been protected by its Japanese parent, which has a turnover of about £5.8bn.

It is not the first contractor to have restructured this year after reporting heavy losses. In March, Gleeson pulled out of the building sector after announcing a £41m loss on construction projects. It sold the business to the management team, led by Martin Smout, although it retained a 20% stake in the company.