Small firms 'to go'

Two of the country's largest contractors have predicted a major rationalisation of the industry which will force smaller and weaker firms out of business.

Taylor Woodrow has said that time is running out for companies relying on the loyalty of shareholders and banks in order to survive. And John Laing says the Government's private finance initiative is forcing a polarisation of the civils market, hastening the collapse of many firms.

Other contractors have opposed the comments.

Taylor Woodrow's chairman, Colin Parsons, described the industry as being in 'a state of flux'. He said: 'I believe changes in the next few years will reduce competition. There will be amalgamations, with some contractors going out of business.'

He warned that companies that had previously been bailed out were not necessarily safe: 'They have been strongly supported by banks and shareholders, and therefore have been able to survive. But eventually they have to produce better results.'

Taywood's construction business in the UK is losing money at the operating level, and Parsons said frankly: 'Only a masochist would buy a contractor at present'.

Meanwhile Laing has predicted that privately funded road schemes will not be additional to government spending plans. Finance director Jim Armstrong said: 'I don't think we completely believe the PFI is additional. We could see the DoT use it for a very substantial part of their requirement.

'Conventional civils contracts could become extremely limited and highly competitive. That is going to reshape the industry,' he added.

Chairman Martin Laing had little sympathy to offer those firms caught in the crossfire: 'When MacGregor announced the DBFO there were complaints of "unfair" from some of the smaller companies who feel they can't participate. C'est la vie. We are in a position where we can, and we are going to make a major push in that direction.'

Laing added the investment demands of private projects may 'be a way to cause fall-out' in the over populated contracting market.

Other contractors immediately contradicted his comments.

Howard Seymour, managing director of Alfred McAlpine's civils arm, said: 'I disagree with Martin Laing. If you happen to be a very big person it's not a bad way to go about things. But what happens to the smaller- and medium-sized people?'

FCEC president Peter Galliford said Laing's comments about additionality were 'wrong', and cited the recent Atkins report as demonstrating public sector demand for construction services far out-stripped current spending plans.