Sir Robert McAlpine’s chief executive Paul Hamer speaks exclusively to CN on working with the notoriously secretive family firm and drawing up plans for the next 150 years.
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6 June 2017. Sir Robert McAlpine announces its new CEO. It is the second time in its 149-year history that the company has looked outside the family for a leader, as Paul Hamer joins from WYG.
Sir Robert McAlpine celebrates its 150th year in 2019. In the last century and a half, it has built much of the UK’s most prestigious and iconic social and economic infrastructure.
But it is also a contractor that is shrouded in secrecy. The notoriously media-averse firm has, for a long time, employed people to say little more than “no comment” to the outside world. You’ll find few anecdotes on the family’s leaders of any real worth by searching online. Indeed, the make-up of the company’s hierarchy today is little known.
As Construction News is invited into McAlpine’s office in the shadow of London’s Gherkin tower for an exclusive insight into the group’s plans, I ask chief executive Paul Hamer whether the company is shedding its private image.
“Coming up to 150th anniversary, the time is right to talk about our legacy and some of the outstanding contributions we’ve made to this country and industry. We want to talk about the business we’re going to be in the future. The family and I want to get people excited about construction.”
Mr Hamer is the second non-family leader of the business. Tony Aikenhead’s reign came to an abrupt end after less than nine months in 2016.
Having left WYG where he had built a strong reputation over a decade, did Mr Hamer need persuading to join the notoriously private firm governed by a family dynasty?
“It’s about chemistry. One of the great advantages is I have my main shareholders sat next to me every day helping, supporting, facilitating, all with that shared ambition. I actually feel empowered, but lucky. Agility is more important than scale. When you think this market is going to do something, it does something different, so our ability to be flexible [is important].”
“I can ask the challenging questions, I can probe and prod and the family listen. And I listen to them as well. It’s a good partnership”
Gavin McAlpine is chairman of the group, while Mr Hamer has put an executive board and senior leadership team together. Members of the McAlpine family have three spots on the board, and the family’s oversight continues with Cullum McAlpine chairing a ‘supervisory’ board.
Mr Hamer says the relationship is working well. “Everything is on the table to be discussed. If it’s in the context of what we want to achieve with Sir Robert McAlpine, everything can be debated. That’s a great environment. I can ask the challenging questions, I can probe and prod and the family listen. And I listen to them as well. It’s a good partnership. We’re only 12 months in, we’re still getting to know each other, but I think we’re becoming an effective unit already.”
Legacy clearly weighs on the family as it approaches its 150th year. Has there been any discussion about the firm moving from McAlpine ownership in future, I ask, having brought in a CEO from a plc?
“Zero,” he says. “Our conversations are about what the next 150 years look like. How do we create inter-generational success. The family are clear this is a family business and will be for 150 years going forward.”
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10 December 2007: Carillion agrees a deal to buy Alfred McAlpine for £572m. This follows a court battle that ended in 2004, in which Sir Robert McAlpine directors argues that Alfred McAlpine – then controlled for almost a decade by non-family members – has sought to brand itself as ‘McAlpine’.
Like everyone else, Mr Hamer says Carillion’s demise is a bad thing for the wider industry. McAlpine has taken on Carillion contracts, including Select Property’s New Bailey Street residential scheme in Manchester. The contractor has also brought in “10 to 12” Carillion staff, each of them “quality, experienced and customer-focused”.
Speculation inevitably leads to people asking ‘who is next’, following a collapse the size of Carillion’s. But while McAlpine has had its difficulties, recording a pre-tax loss of £23m in its 2017 results last week, its balance sheet is strong, with no debt or covenants in place and the family able to add £8m to help pay down its pension deficit, which now stands at £102.8m.
Carillion’s first major profit warning occurred in July 2017 just a month after Mr Hamer’s arrival. Has its liquidation changed how he approaches the job, I ask? “I am very privileged to take over a business with the legacy of Sir Robert McAlpine and that weighs heavily on my shoulders, in a good way.
“First and foremost, I want this business to be stable and resilient. We want to be one of the few construction businesses that grows and becomes stronger. History will show most businesses that grow tend to get weaker. In a pursuit for volume ahead of quality, you can move away from those areas of competency. Carillion solidified that our focus needs to be narrower and based on areas where we have true expertise, competence and track record.”
“Every opportunity that comes through this business has to go through a filter of a number of strategic questions which ask: does it fit with the business direction and strategy”
McAlpine will not bid for rail work (HS2 aside), he says. Others do it “better” and it’s not a core competency. The company will no longer get involved in the energy-from-waste sector due to three problem jobs it has encountered. In London, it wants 50 per cent of its work to come from construction management contracts like on its £700m Battersea or £1bn Bloomberg HQ deals. And despite problems in the sector, it will continue to look at high-end residential work in London, providing it’s not through fixed-price, lump-sum contracts.
“Every opportunity that comes through this business has to go through a filter of a number of strategic questions which ask: does it fit with the business direction and strategy,” he explains. “Inside that, we need a better split of public and private [its work is roughly 80 per cent private at present]. We’re trying to build our public sector work through long-term frameworks, like with HS2 and Highways England.”
McAlpine wants to develop long-term contracting relationships with “six or seven” clients in the civils infrastructure space. These will include HS2, Highways England and Horizon Nuclear Power, as it gears up to bid for work worth billions on the Wylfa nuclear plant with Costain and Hochtief as the Construct Energy JV.
Does the company still want 20 per cent of its order book to come from civils, as former CEO Tony Aikenhead had planned in 2016? “It would be a great place to be but I think what we have to do is build the baseload first. In my eyes, we need to build a base civil infrastructure business,” Mr Hamer says.
“Once we’ve got that, it allows us to invest and speculate a little more, but we need to get our CV out there so clients want to work with us. Twenty per cent would be a nice place to be, but we need to go one step at a time.”
The company will continue to establish joint ventures in the infrastructure space as it expands its client base, he adds.
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12 January 2018. British Land’s Broadgate project director Charles Horne: “Sir Robert McAlpine’s board will want to make sure they aren’t taking on unreasonable risk. We have to accept that and compromise. I can say without hesitation that Sir Robert McAlpine is a long-term partner of British Land on other projects, not just on this one.”
Mr Hamer spends 10 per cent of his time in the company’s Hemel Hempstead headquarters. He has no fixed desk at any of its offices, and says most of his time is spent with clients or at project sites. Although the group wants to increase its construction management work, he says it will continue to convince clients by trading on technical expertise.
“I don’t want to be running a business making a 1 per cent margin; I want to be making 4 per cent margin-plus”
“I think we’re the best builder in Britain. It’s why we get employed on the most complex projects. We’re not constructors; we’re builders. That’s underpinned by the McAlpine design group, the technical experts we have on the ground and how we go about building our client’s assets.”
He also wants McAlpine to be the industry’s “leading collaborator”, winning more of the deals like that at Broadgate with British Land where risk is split and McAlpine is the developer’s sole contractor.
Despite the collaborative ambition, the competitive edge is fierce. “I don’t want to be running a business making a 1 per cent margin; I want to be making 4 per cent margin-plus, and it’s doable with the model we’ve got. By becoming the most certain of contractors, we’ll win more repeat business, our cost of sales will go down because we won’t be bidding for work as much. That will give us operational gearing and there’s [our] margin.
“If we can deliver certainty every time, we’ll be a successful business.”
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13 October 2017. Chuka Umunna, Labour MP: “Awarding the contract for work on Big Ben to Sir Robert McAlpine is an insult to the victims of blacklisting in the construction sector.”
Sir Robert McAlpine can easily lay claim to being one of the UK’s most prestigious builders. Since its establishment by ‘Concrete’ Bob McAlpine in 1869, the firm has built iconic infrastructure from the original Wembley stadium and the Millennium Bridge through to the Royal National Theatre and Olympic Stadium.
The late Lord Alistair McAlpine was deputy chairman of the Conservative Party in the early 80s, and helped to raise millions for the party. The company and individual family members are listed as regular Conservative donors on the Electoral Commission’s website.
Its projects have spanned the breadth of the UK and its family operates in the higher echelons of public and political society. From legendary parties at Cannes during Mipim, to a family which boasted political contacts reaching as far as Downing Street, the McAlpines have been at the heart of this country’s evolution.
But its role in the conspiracy of blacklisting, alongside many of the UK’s top contractors, left a stain on its legacy. Since the blacklisting scandal erupted nearly 10 years ago, victims and campaign groups have often struggled to get political support for their cause. McAlpine was among the contractors to make a public admission of their role in blacklisting in 2015 and has paid compensation to many of the victims. Last October, Labour MPs including Chuka Umunna demanded McAlpine be kicked off the restoration of Big Ben, in solidarity with the party’s union roots and their ongoing campaign for an inquiry into blacklisting.
While its CEO was not part of the company when blacklisting was taking place, he admits he does not know how long it will take to shed the stain from the company’s reputation. “How long will it take to move on? I don’t know. There’s been an apology, compensation […] I think we have to work every day to put it into the past. We do that by making sure everything we do as an industry is ethical and transparent.”
Mr Hamer regularly talks about the need to attract people from all backgrounds into construction, saying “we want everyone to be welcome in our family”.
“As a construction business we employ graphic designers, data analysts, accountants. We haven’t, as an industry, conveyed that message well enough. We want the floors to be open to every individual, regardless of ethnicity, gender, background. At McAlpine, we want to be a home to anyone who wants to come on a journey with us.”
“I’m not a flag-waver; I do what’s right for the business. Bringing Karen onto the exec board has immediately created a female role model to show across our business”
The contractor became the first to be accredited under BRE’s ethical labour sourcing standard in October 2017. Does McAlpine now have to go further than any firm normally would to show its commitment to being an ethical business given the historic blacklisting charges?
“It’s about providing sufficient rigour to show we run our business in an appropriate way. When we go through public procurement those approaches are scrutinised. For me it’s part of the day job, we have to provide information sufficiently, and as long as we do that it will become a historic issue.”
The group has set up a staff advisory board and among the issues Mr Hamer wants to tackle is its board diversity and gender pay gap (30 per cent). Of the three staff he is personally mentoring, two are female and he owes it to them, he says, to see there’s a career progression path.
“It’s fundamental. I’m not a flag-waver; I do what’s right for the business. Bringing Karen [Brookes, director of people and infrastructure] onto the exec board has immediately created a female role model to show across our business and the industry that talented females can make it onto the board.
“We have got a lot of very talented mid-to-senior managers who are female. My wife is a chemical engineer, so I know acutely what it’s like [for her] to work in an engineering business as a minority. My job is to give those two mentees the confidence to say you are quality individuals that add significant value to our business – there’s no glass ceiling. If they are not excited about the opportunity and they leave this organisation, that would be a disastrous loss of value and we won’t let that happen.”
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23 February 2018: Almacantar CEO Mike Hussey: “Dinosaurs take note: you don’t get paid if you don’t turn up; you don’t get paid if you don’t perform. I wouldn’t trust Sir Robert McAlpine Ltd to deliver a pizza after this experience.”
McAlpine will now push for construction management contracts in an attempt to stem the risk passed onto the supply chain that it, like so many others, has suffered from in recent years.
In London it has had its problems, with problem jobs now seemingly coming to an end. The high-end resi losses it accumulated on Exemplar’s Fitzroy Place are notorious. It was expected to reduce exposure to the high-end market in London, as a burgeoning build-to-rent proficiency and its core of offices and public sector work continued to perform.
Then it lost long-time collaborator Hammerson’s £700m Brent Cross shopping centre revamp to Laing O’Rourke last year. A legal dispute with Almacantar on Centre Point Tower followed and culminated in a loss, with the developer’s CEO branding McAlpine a “dinosaur”, tweeting he “wouldn’t trust [it] to deliver a pizza” after the experience.
“London is no different to any other market. We’ll have people who are our advocates and some people who aren’t”
Paul Hamer is in no mood to start a row on the pages of Construction News. I ask about the above incidents and wonder whether London has lost a bit of its love for the firm, to which he points to the contractor’s long-term relationships with British Land and Landsec, as well as work on Battersea Power Station and the new Bloomberg HQ, as proof it retains major clients’ trust.
Undeterred, I ask again about the ‘dinosaur’ tweet. Did you respond? “No, just moved on.” Would he defend McAlpine? “We’ve got a future to build.” He will later reference the tweet at the end of our conversation, showing perhaps that it had more of an impact than he is letting on.
As for the other clients? “Hammerson has been a client for 30, 40 years. We’re very competitive so of course we’re disappointed to have lost out on Brent Cross to Laing O’Rourke, but they’re a terrific builder.”
McAlpine will watch Hammerson’s strategic review with interest, he adds. Intu is another of the firm’s repeat clients. Its proposed £3.4bn buyout by Hammerson would have shored up McAlpine’s activity through one giant property developer before the deal collapsed. But Mr Hamer sees plenty of opportunities elsewhere.
“London is no different to any other market. We’ll have people who are our advocates and some people who aren’t. It’s back to our values: integrity, transparency and honesty. And look: everyone is entitled to their opinion. Our view is we need to be above that and keep delivering for our clients.”
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2 July 2018. Paul Hamer: “My job is to transform and modernise the business completely, without changing it at all.”
The company is now creating a PRS bible packed with data from its completed projects to pitch to investors considering diversifying their portfolio, aiming to create its own long-term pipeline.
It is hiring data analysts, improving its software and digital work to keep employees safer and projects moving faster, and will be the industry’s BIM leader within 18 months, according to the CEO. “Doesn’t sound like a dinosaur of a construction business to me,” he says, referring to Mr Hussey’s tweet.
Having spent nine months talking to McAlpine about moving back into contracting as its CEO (he spent five years at Costain earlier in his career) and a year at the helm of the business, I ask what commitment has he personally made to the family about how long he will stay.
“We’re just about to sign off and implement a five-year strategy, that’s my minimum commitment to this organisation. When we’ve delivered that successfully, I want to become part of the ’McAlpine family’. I’ve set no ambition on a timeline, as long as we’re enjoying it and being successful.
“I made a long-term commitment before I joined. It’s been hard work but it’s been enjoyable too. I was interested in the people, the ambition of the organisation, how they’d feel about transforming the organisation.
“We have to retain the DNA of Sir Robert McAlpine but I was asked to sum it up in a sentence recently and this is what I said: my job is to transform and modernise the business completely, without changing it at all.”
- Paul Hamer, chief executive
- Gavin McAlpine, non-executive chairman
- Hector McAlpine, executive partner
- Edward McAlpine, executive partner
- Boyd McFee, director of building
- Karen Brookes, director of people and infrastructure
- Martin Pitt, commercial director
- Miles Shelley, finance director
The senior leadership team (includes the executive board):
- Grant Findlay, business development director
- Ian Cheung, managing director, Southern
- Mark Gibson, managing director, Scotland and Northern
- Simon Trevor, managing director, Central, Wales & West
- Peter Munn, managing director, Channel Islands
- Paul Heather, managing director, London
- Tony Gates, managing director, Civils