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Contractors divided over trading prospects

Trading updates from two of Britain’s biggest contractors painted contrasting pictures of the UK construction market last week.

Britain’s biggest contractor Balfour Beatty was downbeat, warning that lack of major projects work will continue to suppress its order book.

But Costain was more positive, reporting increased orders. Balfour Beatty said orders had been flat over the last quarter of trading when assessed at constant exchange rates. But at actual exchange rates, the adverse impact of the weaker US dollar had reduce the value of orders to £13.8bn compared with £13.9bn at the end of the first half.

“In the major projects business, there continues to be an absence of large infrastructure projects,” the contractor said.

“The visible pipeline looks weak, and we see little prospect for change in the next couple of years. We therefore anticipate a continuing shift in our business mix away from major infrastructure and into regional work.”

Costain said its strategy of focusing on large, repeat order clients, has led to a further increase in orders since its recent half-year results announcement.

Orders now stand at a new record level of £3bn, up on £2.9bn at the half-year stage.

As well as including over £700M of revenues secured for 2014, the contractor has secured £2.1bn of work for 2015 and beyond.

Over 90% of the order book is for target cost, cost reimbursable work. Costain said it is also preferred bidder for another £400M of work.

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