Following the publication of Balfour Beatty’s financial results for the six months to 30 June 2021 yesterday, which showed it had suffered a £23m underlying operating loss, Construction News has reported that the company is financially supporting some of its subcontractors on problem jobs in the London residential market. Balfour Beatty claimed COVID-related disruption including soaring materials inflation had exacerbated problems on three of its residential schemes in the capital.
CN reports that chief executive Leo Quinn told analysts that materials inflation had been an issue for some of its subcontractors, but that it made more commercial sense to support struggling suppliers rather than replace them. The article quotes Quinn as saying “[we] have a distressed subcontractor situation where we’re propping them up and keeping them going. Some of the subcontractors who are distressed have effectively underestimated the cost on the job, and to replace them would be virtually suicidal, so we’re having to fund and pay that increased cost.”
FIS Chief Executive Iain McIiwee said: “Our members have been expressing concern over material price rises for some time, and it is something that is very much on our radar, particularly as prices are forecast to continue to increase.
I have not seen the details of this, but on the surface the approach Leo Quinn and Balfour Beatty is taking is encouraging. The way to transform construction and to push through this current period of shortages is not to keep squeezing sub-contractors until they go pop, it is working with the supply chain to quantify, share and manage risks together.
We need to stop talking and thinking in terms of contractors and sub-contractors and using aggressive and tight tendering processes where mistakes are inevitable and switch our culture to longer term sustainable, collaborative partnerships built on mutual respect and delivering a better construction product in a better way – let’s hope this is a sign of better times ahead.”