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Leo Quinn: Clients must be 'more discerning' to tackle low margins

Balfour Beatty’s Leo Quinn has said the industry needs “leadership and resistance” over low margins and for clients to be “more discerning”.

Last week Laing O’Rourke financial director Stewart McIntyre told CN that contractors chasing volume had pushed margins down across the board.

“I agree with everything he said,” Mr Quinn told Construction News following Balfour’s annual results

“The point is we need more leadership in the industry and more resistance to being caught up in the bidding game and people awarding jobs at the lowest price.

“Nobody’s valuing that they’re dealing with the likes of Balfour Beatty or Laing O’Rourke who have billion-pound balance sheets.”

He added: “You [clients] can get a lower price, but it doesn’t come with the same reputation, it doesn’t come with the same safety standards, it doesn’t come with the same factories and capital intensity.”

Mr Quinn said the company was targeting “industry-leading margins” of 5 per cent and that clients were crucial to achieving this.

“You’ve got to have more discerning clients, so we’re very selective now about who we work with,” he said.

The Balfour Beatty boss also suggested a rethink was needed over how contractors approached risk on contracts. 

“We’ve got to get back to the sensible sharing of risk and sensible margins for the risk that we take,” he said.

“And when there are disputes, they need to be solved in a timely manner, rather than dragged out for years.”

Speaking to BBC’s Today programme, Mr Quinn said Carillion’s collapse had been helpful because of its practice of submitting low bids.

“Removing a major competitor from the market who was underpricing us all is always helpful,” he said. 

He added that Carillion had suffered from a “lack of leadership” and told CN the company was brought down by too much debt.

However, Mr Quinn said the demise of the UK’s second largest contractor did not represent an opportunity for Balfour Beatty – now the largest by some distance – to boost its turnover.

“Market share growth is always important, but we’re not focused on the top line,” he said. “I’m happy to see flat-to-declining revenue with a growing profit stream.

“We’re interested in returns and we’re interested in cash. We’re not interested in growth for growth’s sake. We won’t chase business under any circumstance.”

Mr Quinn did confirm that Balfour Beatty was engaging with Carillion’s clients with the prospect of taking over some of its jobs.

“We’re working on one contract where we bid for it, Carillion won it on price and we were second,” he said.

“We’re now engaging with that client on our price and our terms.” 

Balfour Beatty has no interest on getting involved in Carillion’s two big hospital jobs in Liverpool and the West Midlands, however. 

“They’re bad jobs to start with so they’ll probably be bad jobs when they finish,” he said. “So I’d stay well clear of them.”

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