Lyndon Scaffolding was once Carillion’s go-to scaffolder, before cutting its ties in the nick of time. Chief executive Robert Lynch outlines what needs to change following the contractor’s demise and what the future holds for the scaffolding sector.
For years, Lyndon Scaffolding was the biggest scaffolding supplier to Carillion in the UK.
But in the months following the contractor’s first profit warning in July 2017, Lyndon Scaffolding began cutting ties with the struggling firm, which has now reduced the impact its collapse into liquidation has had on the scaffolder.
Chief executive Robert Lynch is all too aware of the consequences his business could have suffered – and of the repercussions now being faced by many of his fellow subcontractors.
As he sits down with CN, Lyndon’s boss is preoccupied with what needs to happen next, and the outlook for his market this year.
For the scaffolding trade, Mr Lynch views the London market as particularly buoyant. He points to Battersea as a huge opportunity for scaffolders, while demand for residential work continues to grow.
Brexit hasn’t had an impact yet in terms of a slowdown in work. However, Mr Lynch expects the industry to “hit some buffers along the way” based on his previous experience of Scotland’s independence vote.
“You tend to have a small number of very large projects, so people tend to work project by project rather than company by company”
“Work completely stopped for about a couple of years due to the uncertainty leading up to the Scottish independence vote,” he says. “Jobs that looked like they were going to happen didn’t – and they haven’t really got going again. It’s possibly because of a lack of confidence.”
He singles out regional hotspots in Birmingham and the North, particularly Manchester. However, one challenge the sector faces over the next 12 months and beyond is getting a skilled labour force for the right price, especially in London. “There is a competition on wages; workers will go where they can earn the most money, which is understandable,” Mr Lynch says.
It’s challenging to retain workers after a job has finished, he adds. “You tend to have a small number of very large projects, so people tend to work project by project rather than company by company. If there’s a nice big project on your doorstop, why go to the other side of London?”
Aside from competition for skilled workers, Mr Lynch says subcontractors will have to deal with a more immediate issue: the consequences of Carillion’s liquidation.
Following the collapse of the UK’s second largest contractor by turnover, thousands of subcontractors have been left in the lurch as work immediately stopped across Carillion sites up and down the country. It is thought that around £1bn in retentions were tied up by Carillion. Many subcontractors are also out of pocket from work they haven’t been paid for when the construction giant went under.
For Mr Lynch, alarm bells surrounding the Carillion’s health were raised in July last year when it announced its first profit warning. “We had an expectation that losses would be reported – but nothing on this scale,” he says.
And as the biggest scaffolding supplier to Carillion, it was clear to Mr Lynch that Lyndon Scaffolding’s exposure to this risk needed to be addressed.
Mr Lynch started to withdraw the company’s money through Carillion’s early payment facility at the tail-end of 2017 as the extent of the contractor’s problems started to emerge. “We could draw down the money in 30 days without a penalty, with money lent by the bank,” Mr Lynch says. “This enabled us to get our money quickly.”
What projects has Lyndon worked on?
Millennium Stadium, Cardiff | Lyndon Scaffolding first provided scaffolding on the roof for what is now the Principality Stadium in 1999. The firm has since been called back once more to design and build the scaffold to replace and test wire bonds that support the rood on the stadium.
BBC Broadcasting House, London | Lyndon worked on phase one and two of the refurbishment of the BBC Broadcasting House, which was completed by main contractor Lendlease in 2010. The team was on site for 18 months installing a full scaffold to the building.
Tate Britain, London | The company describes the access work it completed at Tate Britain as “one of the most challenging refurbishment projects” carried out in London. Six temporary roof structures were built in order for the gallery roofs to be reconstructed.
Battersea Arts Centre, London | A temporary roof was installed for major renovation works to take place at Battersea Arts Centre after a fire damaged the Great Hall. Lyndon was appointed for the works in 2015 and completed the job in March 2016.
The company is currently working on two of Carillion’s most high-profile projects, thought to be central to the contractor’s demise: the £353m Midland Metropolitan and the £335m Royal Liverpool hospitals.
Work has stopped on both projects, with subcontractors have been uncertain whether to continue work or not. “There’s nothing happening on these jobs at the moment,” he says. “People are trying to work out what to do next.”
Mr Lyndon says there’s a “relatively high assurance” that firms will be paid from 15 January onwards, but question marks remain over whether they will be paid for work conducted before this.
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“At the moment, the straight bat is you’re not going to get paid anything, which is quite hard for people to bear,” he explains. “We will commit to finishing the work – we’ve worked with these guys for a long time and you want to show commitment and help them get it over the line. But I don’t think we’ll get the money for the work we’ve done before 15 January.”
He says there has been no main contractor willing to take on these headline jobs, suggesting this is probably due to the risk involved in the jobs. “However, it would be a disaster of biblical proportions if it isn’t built,” he says.
What needs to change?
Carillion’s collapse should be a wake-up call for the industry to assess fundamental problems with contractual practices and adversarial supply chain relationships, Mr Lynch argues.
“One of the issues is that contractors are not bidding enough money for work for buildings, and are trying to build them too cheaply,” he says. “Main contractors can’t make money they need to make for the risk they are taking on, which means this is pushed down. Inevitably, subcontractors get the pressure and there’s conflict. It makes for an unhappy environment.”
“One of the issues is that contractors are not bidding enough money for work for buildings, and are trying to build them too cheaply”
The relationship between main contractor and client is the root cause of this problem, according to Mr Lynch. “Main contractors aren’t being paid enough – so what can they do? Someone is always prepared to undercut you.”
Although Carillion’s collapse marks a historic moment in construction, Mr Lynch is doubtful whether the industry will learn from this cataclysmic event. “I don’t think anything will change after Carillion,” he says. “Ideally you’d want main contractors to put up 10 per cent of their prices to make a profit that warrants the risk they are taking on. But it’s not as simple as that.”
What next for scaffolding?
Carillion aside, Mr Lynch predicts the scaffolding trade will see some healthy competition over the next year or so.
“As a trade, scaffolding has changed over the years,” he says. “Household names, like SUB, Deben Services, Palmers, Interserve: these were historically big beasts. All of them to a degree have shrunk dramatically – some through choice, circumstance or competition.”
This has meant that a number of new players have entered this market, including French firm Altrad, which has become the biggest scaffolding contractor in the UK. Mr Lynch says the impact of Altrad’s entry into the UK sector has not yet fed through the market.
However, he hopes these new entrants will help introduce innovation and higher standards throughout the sector. “I expect the scaffolding trade to change quite a bit,” he adds. “I would expect to see larger private companies go out of the market in the next couple of years because they sell out or someone decides to copy them.”
But competition from other firms hasn’t pressured Mr Lynch to take on more work than he thinks the company can deliver. “We’re in the position that if we grow, we grow, but we will only take on work we can deliver and make a profit on,” he says.
“We want to be the best scaffolding company and we want to be the best subcontractor on site. If we grow as a result of that – then that’s great.”