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Clients like conflict says BB boss

CLIENTS ARE threatening to undermine efforts to end conflict in the construction industry, Balfour Beatty chief executive Mike Welton warned this week.

'There are still customers out there that want confrontation,' he said

'I do not believe in it and I do not support it as a way of working, but any industry that has had a history of confrontation and poor quality will take a long while to correct itself.'

Welton's comments came as Balfour Beatty revealed that it had doubled its operating profits from £16M to £30M in the first half of 1998 while turnover remained static at just over £1bn.

Margins were still low at just 3% despite the contractor's push towards negotiated and partnered work.

Welton said that despite the recent procurement reforms set out by Sir John Egan's Task Force - and driven forward by Deputy Prime Minister John Prescott - there were still contractors prepared to work for margins below 1% and clients willing to employ them.

'There are responsible customers that are starting to give savings back to the contractor,' said Welton. 'But it is still tough. We have to create an atmosphere of trust.'

Rail infrastructure maintenance and new build projects in the UK continued to bolster Balfour Beatty's performance.

Recently won projects such as the Euston Station remodelling and track renewal in Railtrack's southern region added over £100M of business each to the firm's annual worldwide turnover of £400M.

Prospects for road projects are bleak, although 'no worse than we had anticipated,' said Welton, who added that the outcome of recent roads review had added 'an air of certainty' to the sector.

Welton said he was looking to businesses like the US civils market to yield better margins and more work over the next few years - particularly now that the building division there had been wound up. 'The construction market in the US is one of the most open and straightforward,' he said. 'But it is much more litigious - rather like the UK 10 years ago.'

Antony Oliver

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