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Battle for the new king of contracting

2005 REVIEW - COMMENT

THE COUNTRY'S four biggest contractors are now either embroiled in takeover talks or looking to split their businesses.

For this reason alone, 2006 is shaping up to be the biggest period of upheaval in the upper echelons of contracting since Tarmac and Wimpey shook hands to seal their asset swap deal a decade ago.

It also heralds an unwelcome period of uncertainty for the 100,000 or so staff employed by the gang of four.

Amec boss Sir Peter Mason is officially reviewing his firm's standing but it is almost cer tain to abdicate its position as king of contracting next year by breaking the group into separate energy and infrastructure businesses.

This explains why such a battle royal has erupted over who will be crowned Britain's biggest contractor.

If Carillion's £291 million bid for Mowlem is successful it will pave the way to create a strong regionally spread business jostling shoulder to shoulder with Balfour Beatty.

This threat seems to have dragged Balfour into the fray with ambitions to trump Carillion's bid and seize the title decisively.

To add to the f lur ry of takeover speculation spreading across construction, the water utility company AWG is now looking at the possibility of selling its Morrison contracting arm. There seems to be something for everybody.

But the stakes are very high for those planning to fork out hundreds of millions of pounds on a leg up to the top. Building up big businesses with strong regional spreads has both its up and its down sides.

Size may matter when it comes to bidding and securing private finance initiative contracts and, yes, more Government spending is planned to be channelled through the regions, but this should be balanced with growing unease about the streng th of orders next year.

It is worth remembering that the reason why much of the contracting sector is going through change in the first place is because trading has been tougher than many have been prepared to admit.

It is the privately-owned regional contractors that seem to be prosper ing at the moment, firms that can take decisions that do not have to meet the short-term demands of pension fund managers in the City.