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Morgan Sindall targets 'rapid' northern growth

Exclusive: Morgan Sindall is looking to rail, food retail and education to be among its priority targets, the head of its northern business told CN.

The firm is restructuring its construction business from six to four divisions to adjust to the “new normal” of lower construction volumes after reporting a rise in profits but a drop in order volumes, said Dave Smith.

The restructure means the firm will “continue to look for efficiencies”, he added, but declined to say whether it will mean job cuts.

Mr Smith is predicting an upturn in the commercial market, particularly in Manchester.

“We are hoping [to see it at] the back end of 2013 when further take up of prime commercial space will mean there will be a shortage,” he said.  “Nobody’s going to build speculatively.”

Morgan Sindall is positioned for the right sectors in the north, with rail expected to grow “quite rapidly”, he added.

In the next couple of months, Morgan Sindall north is looking at £140 million of work in the industrial and commercial sectors, £153m in higher education, £65m in transport and £45m in retail. He also pinpointed research and development.

The firm’s restructuring is “a straightforward reaction to the market”, he said, and comes as Balfour Beatty continues with its plans to restructure its business into three divisions.

Kier and ISG both said last week that they restructured parts of their business last year in response to falling workloads.

While declining to say his firm’s restructure from six to four divisions would lead to job losses, he said his firm will “continue to look for efficiencies” through a process that “reduces costs and keeps us competitive”.

“If there is continued reduction in construction activity then we will continue to react to that,” he added. “There’s been no redundancies to date.”

A spokesman said there is no staff consultation running at present.

Morgan Sindall saw a rise in pre-tax profit in the first six months of 2012 with construction margin holding at 1.5 per cent but a drop in the order book from £1.9bn to £1.5bn.

Mr Smith predicted that the current climate will last “for quite some considerable time” and the firm is adjusting in response.

“Something that we are talking about internally is that this is the ‘new normal’ and we are just preparing ourselves for continued sustainability in the business,” he said.

“If we were a business that was continuing to maintain the status quo throughout all of this, hoping that around the corner there will be an upturn in the market, there’s an element of wishing involved there, and that’s not good business.”

Kier’s chief executive Paul Sheffield told CN last week that restructuring is an “ongoing business process” for any contractor.

Last month, the Construction Products Association found contractors were seeing an accelerated decline in orders.

It found that 30 per cent more contractors reported rising costs than those who said costs were falling.

Mr Smith said that the new structure means more access to the Morgan Sindall workforce.

“Within a smaller region we have got a smaller pool of staff to pick from for specific projects,” he said.

“The larger the regions, the larger the organisations, the more choice.”

He added:  “We are in the construction industry, we are typically nomadic and we will travel to where the work is. 

“That’s part of our culture so moving staff from the North-east to the North-west, from the North-west to the North-east, and down to the Midlands and vice versa is not something that’s an issue.”

Changes at the top - Morgan Sindall

Dave Smith becomes construction MD for north of England and Wales

John Homer has become construction MD for the south of England and Wales.

Scotland will continue to be led by Harry Thorburn while Peter Jacobs will retain responsibility for the London and aviation teams.

Gordon Ray and Peter Whitmore will be leaving the business as a result of the restructure.

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