Wates boss warns of more failures due to underbidding

Underbidding by contractors is so rife that 2011 will see more Connaught-style collapses, the chairman and chief executive of Wates has warned.

Paul Drechsler was speaking as the company announced a 4% increase in turnover and a 12% boost in profits.

Drechsler said: “The level of underbidding makes it more certain that we will have very dissatisfied customers or failed suppliers.”

“There will be further failures in the next 12-18 months. The bidding in some areas - I don’t understand it,” he said.

Wates managed to grow its turnover slightly during 2010 from £945m to £985m on the back of its social housing arm, Drechsler said, and despite the cancellation of the BSF school building programme Wates had a “strong year” in education.

Pre-tax profit grew from £38.9m to £43.5m, while Wates’ order book stood at £2bn.

“We are cautiously optimistic for 2011,” Drechsler said. “We expect to continue to grow and be successful in our social housing arm and in education. Yes the demand is less but there are still opportunities,” he said.

Drechsler did not rule out acquisitions but distanced Wates from acquiring major consultants to offer more services to clients. This was a strategy pursued by rival Costain, which unsuccessfully attempted to buy consultant Mouchel in a series of offers over the past four months.

He also said that the firm would be “open” to expanding with partners across the Middle East from its base in Abu Dhabi.