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'Look at the horror stories' – Durkan's MD on the risks of contracting

Durkan managing director Jim Briggs tells CN the firm has yet to see consequences following the EU referendum, and explores what the impact might be if Jeremy Corbyn came to power.

Jim Briggs is not afraid of Jeremy Corbyn winning the next election.

Unlike many in the business community, the managing director of contractor and developer Durkan appears phlegmatic about the prospect. “If a Corbyn government happened I don’t think it would be a problem, as [Labour] would put more money into social housing,” he says.

Building homes, either for housing associations or local authorities, is an area of focus for Durkan, so Mr Briggs’ attitude is understandable, given Labour’s pledge to build 100,000 council homes a year. “It means we’d do more contracting for housing associations and councils. We can do that quite quickly,” he says.

But is he not fearful, considering some of the anti-business rhetoric from shadow chancellor John McDonnell? “I wouldn’t say fearful, you just have to adapt,” he says. “We’re a privately owned family business so we can change quite quickly.”

He says it is “encouraging” to see the current government’s plans for “substantially improving the supply of new housing”, announced in the Budget. However, he only regards the stamp duty change as a “good first step” which “on its own will not address the issue of affordability, particularly in London”. 

“The risk [of] doing pure contracting is quite high at the moment, there is not enough reward in just doing contracting”

Mr Briggs’ attitude could be explained by the fact he has nearly 40 years’ industry experience.

He has spent his whole career at Durkan, having joined the business as a trainee surveyor in 1978. Now 57, he has the air of somebody who has been through a few recessions – and governments of both shades.

Core focus

The relatively small size of Durkan helps. Based in Borehamwood, Hertfordshire, the firm directly employs around 165 people and in its last full year recorded turnover of £141m.

It is led by executive chairman Daniel Durkan, who took the reins from his father Bill Durkan in 2010 – an Irishman who established himself in England in the 1960s doing plastering jobs, before launching the firm in 1970.

It’s a business that prospered by focusing on its core area of developing and building homes in London and the home counties, with its average job now worth around £20m.

Carillion logo van worker

Carillion logo van worker

Durkan’s MD cites Carillion as evidence margins are too low

Like many contractors, though, Durkan has had its issues of late. “We’ve had a very bruising three or four years,” Mr Briggs admits. In its last full year, pre-tax profit slid to £10.2m, down from £19.1m the prior year, after being affected by a number of legacy contracts. These legacy jobs finished last year, Mr Briggs says, and he expects a healthier bottom line in the current year.

The risky nature of contracting, however, has prompted Durkan to change the way it works. It wants to generate around 60 per cent of its business from JVs and partnerships with the remainder coming from pure contracting, reversing its current structure. Durkan has also cut the number of jobs it is doing. The firm currently has around 15 ongoing projects, compared with 40 this time last year.

“A lot of people have come to the conclusion that the margin is too low. Look at some of the horror stories you’ve had, like Carillion. Even companies like Galliford Try – they’ve had one or two bad jobs”

“It’s not just about keeping the business going; we want to do the right schemes,” Mr Briggs says. “The risk [of] doing pure contracting is quite high at the moment, there is not enough reward in just doing contracting. We are pretty good at it, but you need more of a blend. With JVs it’s a partnership, the rewards are higher and risks are spread more.”

One example is a £71m deal Durkan signed with developer M&G this year for a 206-home PRS scheme in Ilford, east London. The project is Durkan’s first with a major institutional investor and Mr Briggs says it is looking to do more of these.

He is also only too aware of the risks of operating on wafer-thin margins. “Margins in contracting are too small – it’s 2 per cent if you’re lucky.” Referring to this year’s CN100, which showed that the UK’s top 10 contractors are making an average pre-tax profit margin of -0.5 per cent, he adds: “That’s just wrong and not healthy for the country, let alone the industry.”

He says: “A lot of people have come to the conclusion, [from] the government down, that the margin is too low. Look at some of the horror stories you’ve had, like Carillion. Even companies like Galliford Try – they’ve had one or two bad jobs.”

Durkan is heading for around a 3 per cent margin from contracting this current year. “We aim for 4 per cent for contracting and we’re heading in the right direction,” he says. The firm has achieved 5 per cent in the past, but Mr Briggs argues this is still a “very good year”.

Two-stage tendering shift

In terms of lessening risk, Durkan is increasingly moving towards two-stage tendering. “We are doing more of that, instead of straight single-stage tendering, which is impossible when you haven’t knocked the building down and you don’t know what’s in the ground.”

For Mr Briggs, quality remains an issue for the industry. “The reputation has got worse in the last couple of years and a lot of it is to do with the ways things are procured. It comes back to this lowest-price, take-all-the-risks [approach]. The way industry is subcontracted out means risk gets pushed down and then everybody is taking on risk. When there is not enough money, corners could be cut.”

“The initial reaction [to the referendum]: it felt like the end of the world, but it hasn’t quite come about… people are just getting on with it”

Though Durkan appears in a good place right now, like every business it is wary of how the UK will cope post-Brexit.

Mr Briggs appears frustrated at the uncertainty, describing Brexit as a “dark cloud”. Being a South-east firm with a significant presence in London, Durkan benefits hugely from a ready supply of eastern European labour. Any restriction would severely test the company.

The end of the world?

“Are there any advantages being out of Europe? I can’t think of many really,” Mr Briggs says. “The initial reaction [to the referendum]: it felt like the end of the world, but it hasn’t quite come about… people are just getting on with it.”

He adds: “Free movement of labour is probably the biggest bonus of the EU for your average person, it’s not being able to go and get your cheap booze from France. With free movement of labour – we have really benefited over the years.

“The industry needs [EU workers] and the country needs them – lots of industries rely on these people.” We’re an Irish company and in the last recession a lot of Irish workers came over. Then when things pick up they tend to go back, in the main. A lot of eastern Europeans will go back.” But he claims he has yet to see any exodus from Durkan’s sites.

Theresa May

Theresa May

Mr Briggs says Theresa May must ”look at labour, you can’t turn this tap off”

Amid concerns over access to EU workers post-Brexit, the industry is aiming to attract more homegrown talent. Is Mr Briggs hopeful this tactic can work? “[Construction] is a good industry and the rewards are there,” he says. “But what will drive people back into trades is [university] tuition fees.”

So what would his message be to young people looking to get into the industry? “Every day and every project is different, every building is different – it’s the variety.”

Returning to the subject of politics, what main missive would Mr Briggs have for Theresa May? “My message would be to sort out Brexit. Look at labour, you can’t turn this tap off.”

Would Mr Corbyn take a different approach? 

Perhaps we’ll find out one day. Either way, Durkan’s managing director is comfortable. As he says: “Business is carrying on in spite of Brexit and in spite of the government.”

Post-Grenfell implications

The investigation into the causes of the tragic fire at Grenfell is ongoing. But Mr Briggs believes that eventually it will become mandatory for all flats to have sprinklers, regardless of their size.

“It’s an anomaly where with new-builds you have to have [sprinklers] and with refurbishments you don’t have to,” he says.

On Grenfell Tower itself, Mr Briggs is bold: “If I was to be really political, I could say that it should have been knocked down.

“If the government had invested in its stock, you shouldn’t really mess about with a building – because you lose its original design integrity and you try to improve it but you’re probably not.

“If you go to other parts of the world, they’d be knocking it down.”

 

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