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UK must warm to global l challenges

INTERNATIONAL - Construction in the UK may be booming, but contractors should not take their eyes off international opportunities, writes Emma Crates

JUST how international is the state of British construction these days? At home a mix of major foreign players, such as Bouygues, Bechtel and Multiplex, jostle for work against domestic firms.And, as the skills gap widens, Eastern European workers are lured to the UK by its comparatively higher wages.

But British contractors, particularly those that are listed on the Stock Exchange, are less likely to be as active abroad as they were 20 years ago.

'There are relatively few contractors who are active internationally - Balfour Beatty is by far the biggest, ' says Graham Hand, chief executive of the British Consultants and Construction Bureau.'Publicly listed companies are vulnerable to the City.Whatever they try to do internationally, they get marked down.'

The buoyant domestic construction economy could explain the reluctance for many firms to set sail in search of new markets.And British firms considering dipping their toes into new waters may be put off by bureaucratic wrangles, language difficulties, or competition from local firms using cheaper labour.

'It takes a greater skill to go abroad and make a profit.UK firms have to be high-tech or niche, or they have to dominate certain markets, as does Taylor Woodrow in Ghana, ' says Mr Hand.

But privately-owned companies, which can be speedier in their decision-making than their publicly listed competitors, are more likely to be attuned to the idea of working internationally.And British consultants are demonstrating a more global ambition.

'It's not that we are less risk-averse, ' says Tushar Prabhu, a director with privately-owned engineering consultant Pell Frischmann.'The difference is often in the speed of the decision-making.We can short-circuit our process.

Publicly listed companies may have to wait for board meetings.'

Pell Frischmann is involved with a range of projects in the USA, the Middle East, India and Romania but Mr Prabhu says that the company will only go to those countries where it has connections.'There's a lot of British interest in Libya, but we wouldn't consider setting up shop because we don't have the contracts.

By contrast we went to the USA with contacts and, even though competition was fierce, we won work.'

'We would never go into a country speculatively, only with an existing client, ' adds Tom Harrison, managing director of Turner and Townsend's international division.'For example, we are working with Nissan around the world.We had never been to the USA before but Nissan invited us to go.

Now we are running a five-year rebranding fit-out project in the showrooms there.'

The local approach is clearly important. Balfour Beatty, one contractor that is openly ambitious of expanding its international operations, has recently bought a 50 per cent share in Hong Kong contracting giant Gammon.The company is also seeking out acquisitions in the USA.

'International projects currently account for around 20 per cent of our work, but this will change with the purchase of Gammon, ' says a spokesman.'We'll be doing much less expeditionary work in the future.

We're only looking to work outside the UK in permanent joint ventures.'

Balfour Beatty closed its Philippines office earlier this year, because work was sporadic. It has also sold its offices in Turkey and Oman in recent years.

Many consultants report that they too are focusing on key markets.

During the rise of the Asian tiger economy, Atkins was chasing power and water-related projects in Indonesia, Malaysia and Thailand but withdrew from the area around five years ago as demand declined.

Norman Schunter, group managing director for design, environment and engineering at Atkins, says:

'In hindsight our approach may have been a bit scattered.Now we focus on key markets and make the most of them.'

Atkins has broken into the lucrative Chinese market and is working on a number of urban development and regeneration schemes, including the development of Thames Town, a British-style satellite city outside Shanghai, which will accommodate 500,000 people.

Atkins now has six offices in China and Hong Kong.Mr Schunter does not rule out the possibility of more opening in the future. But he admits it is a difficult market for contractors to break into.

'There is very little in the way of UK contracting out there.They have to go into joint ventures with local companies, which would be difficult, ' he says.

'It can be challenging and time-consuming, because they keep changing the rules, ' agrees Mr Harrison.'It's very important to get the right mix between expats and locals.We have gone in with international partners.'

Balfour Beatty, one contractor that has made inroads into mainland China, admits that the company's presence there is small.A spokesman says: 'We can't compete with the locals as a general contractor.We'll be offering large-scale management expertise.'

In the Middle East it is hard not to be stunned by the building frenzy currently taking place in Dubai, which is soaking up materials and labour forces much in the same way as China is soaking up the global supply of steel (see pages 24 - 25).

But British contractors lured by the glut of work should not overlook other countries in the region.Atkins says it is involved with a number of projects - particularly tourism-related work in the Middle East.

'We are still busy in Oman and in Bahrain, ' says Mr Schunter.Atkins is involved in the development of the huge scheme at Durrat Al Bahrain, a $1.3 billion project to be built over reclaimed islands.

Meanwhile Jordan is planning to revitalise its 17 km of coastline at Aqaba with a giant redevelopment of its ports, retail and tourist facilities over an area of 375 sq km. Pell Frischmann is part of the US-led Bearing Point consortium, which is overseeing the development.

In the USA, transport is the focus for Balfour Beatty, whose transport projects include joint ventures on the SH120, a $1.2 billion toll road in Texas.The company wants to increase its road and rail work and is also looking at new sectors, while Faithful & Gould, the US arm of Hanscomb Faithful & Gould, is exploiting a number of opportunities in the biotechnical and education sectors.

Mr Hand warns that more UK contractors should be thinking internationally.Many of the larger players have experience on Public Private Partnerships and Private Finance Initiatives, which could give them a competitive edge as foreign governments increasingly experiment with these financing models.

He says: 'I don't see how major contractors can seriously expect to be purely domestic.Things may be buoyant in the UK, but this will change.