New structure for Skanska

by John Leitch



Skanska Construction has a new business structure. The reshaping reflects the increasing importance Skanska places on the UK market.

Keith Clarke, chief executive, has split the £1.4bn-a-year business into three operating divisions. Skanska UK is the largest division with a turnover of £700m. Clarke's intention is to generate closer working relationships within the five strands of this division: building, M&E and F&M; civil engineering; and specialist trades.

Clustered into Skanska's second operating division, World Markets, are mining, liquid natural gas facilities, and international current projects. The latter is being wound down. "We're letting our international projects, the ones managed from the UK, run out," said Clarke. They are being replaced by specific overseas teams.

Asia, Skanska's third operating division, is made up of Gammon Skanska and Skanska Cementation India, businesses in which Skanska has a 50% and 64% shareholding respectively. The fledgling Indian business, which had a turnover of £40m last year, is expanding rapidly having won five major road jobs despite only recently entering this market.

Strengthening Skanska's position in the UK construction market has been the key to Clarke's business restructuring. "Things are going in our favour," he says. "Quality issues are higher up the agenda here in the UK, and that's something Skanska has been concentrating on.

"Also, the reshaped UK business is designed to get our specialist and main contractor elements working together more. We like the fact that the UK is a mature market where government and funding agencies are up to speed."

Clarke has prepared for the advent of rail PFI projects by recruiting extra staff and providing additional training. "We've also been looking at the way in which we manage design and the way we resource bids," he added.

"We have pre-qualified, in joint venture with Amey, on the East London Line project which has a spend of £300m to £400m. The work is coming from the Strategic Rail Authority and it is the first PFI deal for a rail upgrade.

"If the country is to invest £60bn in improving rail infrastructure, this has to be the first of many rail PFI deals. At some point we must see new lines, junctions and capacity increases - and train operators don't have the balance sheet to take on these improvements."

Although keen to play a part in future rail PFI work, Skanska resisted getting embroiled in the London Underground PPP. "I thought we could better use our management time for other things," explained Clarke. "Your scarcest resource is management time - not money or PFI equity - so you must use it well.

"Looking back it was a wise decision, though the London Underground PPP situation is not good for the UK construction industry, as our competitors are wasting good money. For that reason, I'd rather the PPP had gone ahead smoothly and that I'd been proved wrong [to opt out]. I'm certainly not smug about Skanska's decision."

Clarke feels that all contractors can benefit from Partnerships UK's staff, whose negotiating skills can be brought on board to resolve difficult problems with an individual project. PUK is the government organisation created to offer on-going support to the PPP process.

"That pool of expertise is more needed than ever," he said. "Risk transfer is getting more complex, the deal flow is faster and the easy deals have all been done. PUK's assistance is extremely important."