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CNinsight100: Skanska sees cuts as opportunity

Skanska’s president has said the company will focus heavily on nuclear and energy waste projects this year in order to offset the impact of the government’s cuts in public sector spending.

Mike Putnam told Construction News that he expected the sectors to provide substantial opportunities over the coming months as the coalition’s austerity drive further squeezes construction budgets.

“It’s clear nuclear and energy waste projects are going to be areas of substantial growth in the coming years,” he said.

“We’re still a big PFI player though - major and mega projects. We like providing big projects with care and skill,
combining strengths from across the group.”

Unprecedented PFI He cited the Swedish university hospital PFI project New Karolinska Solna as an example,
in which Skanska invested almost £55 million.

The design-and-build contract, totalling almost £13 billion, is the largest in the company’s history and will be completed as part of a scheme split 70/30 between the Swedish and UK branches of the business.

The firm has also enjoyed sustained growth in the utilities and facilities sectors but questions still hang over its exposure to the BSF cuts.

We have learnt our lessons from the past and moved forward. You can see from our results in the Q2 2010 we’ve had improvements on those issues.

Mike Putnam - Skanska

Exposure issue

Back in February, Skanska beat Carillion to be appointed preferred bidder on the £1bn Essex BSF contract. Since then, 18 schools have been stopped while nine schools remain unaffected.

Mr Putnam played down the company’s exposure to the cuts and remains confident the scheme will retain its substantial size. “The project is only temporarily paused, pending the spending review,” he said.

“Admittedly it is a huge programme, but if it reduces to a modest-to-big programme then that’s ok for us. We always ensure that we only book the work when it becomes a proper contract anyway.”

Mr Putnam said he spends a “considerable” amount of his personal time working on risk management, from both the commissioning and bidding stage.

Lessons learnt

The priority stems from the losses that Skanska sustained in 2008, when the UK business confirmed
writedowns totalling £47.5m under the then chief executive David Fison.

“We have learnt our lessons from the past and moved forward,” he said.

“You can see from our results in the second quarter of 2010 that we’ve had improvements on those issues.
“However, we are not complacent, construction isn’t an easy game and we must be very careful - as you can see from other recent developments in the industry.”

The green agenda remains a top priority at Skanska and Mr Putnam said he believed that the company was leading the way, a priority that he attributed to its Swedish roots.

The ModernaHus housing concept saw substantial success in May with a £13m deal with Notting Hill Housing - the first development of its kind.

The concept involves the construction of blocks of apartments that are typically 30 per cent more energy efficient
than normal homes, and include a large element of off-site manufacture.

Mr Putnam said he hoped the success of the Notting Hill Housing project would subsequently lead to the
ModernaHus concept being incorporated into housing developments throughout the country.

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