The mechanical and electrical sector “is not out of the woods” and is unlikely to recover in the next 12 months, Spie UK’s chief executive has said.
Speaking to Construction News, James Thoden van Velzen said Spie UK’s building services division “has been reduced quite deliberately because of the risk”, with more focus shifting to its facilities management and industrial services businesses.
It is also carrying out more work directly for clients such as airports.
He added that Spie Group “could very easily do what Emcor and Mitie have done” and exit the M&E market in the UK, but that it would not do so because it wanted to remain a technical business and offer a full range of design, build and maintenance services to its clients.
Its building services division was this week awarded the second phase of Stansted Airport’s £80m Terminal Transformation project.
It will provide construction, mechanical, HVAC, electrical and plumbing services to 46 new retail units at the airport.
Despite difficult conditions in the M&E sector, Spie UK’s turnover increased by 28 per cent last year to £312m in 2013, compared with £243m in 2012.
The French-headquartered firm’s group turnover grew by almost 11 per cent to €4.6bn (£3.75bn) in 2013, while operating profit was up almost 14 per cent to €298m (£243m).
“Main contractors are working to very reduced margins and when everyone is struggling at the top, everyone else is hard hit”
James Thoden van Velzen, Spie UK
Last year, the UK business acquired Alard Electrical in May and Electricity Network Solutions in September.
Mr Thoden van Velzen said it would look at further acquisitions to boost its presence in the North-east and the Scottish Highlands and Islands.
He said he did not expect the M&E sector to recover this year, as it would take longer for the market to build up to pre-recession levels and for the government to commence planned infrastructure spending.
He added: “My personal view is that main contractors have taken low-value work – they all played in a very small pond because there was little work in the market.
“They are working to very reduced margins [and] when everyone is struggling at the top, everyone else is hard hit.”
He said that M&E contractors were particularly badly affected because they are often one of the largest subcontractors to main contractors and their work comes at the end of the building cycle.
“We have moved away from main contractors and more towards end-users, and we deal directly with clients; 12 per cent of our business is with main contractors”
James Thoden van Velzen, Spie UK
Since joining Spie UK in 2010, Mr Thoden van Velzen has diversified the business to allow it to continue to grow during the downturn.
“When I walked in the door, 80 per cent of our work was with main contractors and very building services-related,” he said.
“[Now], we have moved away from main contractors and more towards end-users, and we deal directly with clients; 12 per cent of our business is with main contractors and a lot of that is around our work for Heathrow, Gatwick and Stansted airports.”
As a result, he said, Spie UK had not been forced to take work at unsustainable margins.
The firm is interested in opportunities in nuclear new build and is in discussions with EDF Energy for installation and maintenance work at Hinkley Point C.
“What is important for us with the nuclear industry is nobody can try to say, ‘I was there and part of the last nuclear new build programme in the UK’,” Mr Thoden van Velzen said.
“Spie has worked across France on nuclear sites, so we have that experience,” he added.
Mr Thoden van Velzen said Spie UK had invested in training during the downturn, with the contractor spending twice as much on training in 2013 as it did in 2010.
However, he admitted he was worried there was a gap in the UK’s skilled workforce.
“I look at our bigger projects and see we’ve got a senior workforce and a junior workforce [but] there is a gap in between,” he said.
“We need to do something about it – we have only got 20 per cent of the engineers that we will need to 2025.”