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Top UK firms hungry for a slice of the American pie

Maunsell hopes its deal to join US engineering group AeCOM will give it access to the biggest civil engineering market in the world. Antony Oliver asks whether other UK firms should be heading west for a slice of the pie.

WHEN PRESIDENT Bill Clinton unveiled the Transport Equity Act 21 funding plan in July 1998, he kicked off a nationwide spending spree on a scale which the UK could only dream about.

The amount of Federal cash earmarked to boost the US's longneglected transport infrastructure is huge.

In the five years until 2003, around £125bn could be ploughed in, accompanied by match funding from each state receiving the money. Road and railway maintenance and enhancement is the priority along with other safety measures and environmental improvements to bring transportation in the US up to world levels.

Add to that recently passed aviation legislation which looks set to boost airport construction and expansion across the US plus the forthcoming water resources act and you get a very healthy picture for the construction industry.

AeCOM President Ray Holdsworth, who recently secured the deal to bring Maunsell under the group's umbrella, has no doubts that there is not enough capacity in the US to do the job.

'The TEA 21 programme is a year and a half old and there is already a backlog of work, ' he says. He points out that Federal agencies have taken time to put things in place and have had to raise spending from 11% of the total fund in the first year to 19% in the last.

'We do think that there will be pressure to execute the work (within the specified timeframe), ' he adds.

Holdsworth believes the need for urgency does not stop with the execution of work but also extends deep into the project management and conception. Each individual state has to find funding to match the Federal cash and innovative deals will have to be struck to get the TEA 21 work moving.

That said, Holdsworth is adamant that bringing in UK specialist expertise - which takes the group to around 11,000 staff and puts it head to head with the likes of Bechtel and Parsons Brinckerhoff - is not just about tackling the home market.

'We are looking at the whole market strategically not just at TEA 21, ' he says. 'We are looking at our global strategy - yes the heyday is in the States at the moment but we think the European and South East Asian markets are going to be strong again. Maunsell gives us better access there.'

But certainly, getting a slice of the lucrative US market was high on Maunsell's agenda when it put its shares in the AeCOM pot. In striking the deal, Maunsell will have been aware of the acute difficulties faced by outsiders wanting to get into the US market.

WS Atkins managing director David James agrees: 'UK engineers will find it very difficult to work in the US. For a start, there are already some very good people there. But registration is an issue - there is not just one country but 52 states.'

Alternatively, there are areas where UK engineering knowledge is particularly prized by US operators. The electricity and water privatisation programmes in the UK have allowed the development of world class skills. Parsons Brinckerhoff chairman Bob Prieto said last month that UK power engineers were 'the best in the world' (NCE 24 February).

However, all agree that getting local knowledge and experience is vital when moving into a new market. In the US, the extreme competition plus the multitude of local business rules and practices means you will not last long without it.

In January, Atkins bought into the US by taking over the Benham consultancy, a £55M turnover Oklahoma-based firm.

'The US is a very big market, ' he says.

'We believe that, as a global business, there is a long term future there. You cannot be a global player unless you are in the US.'

This time last year, when interviewed for NCE's Consultants file, James identified the US as one of Atkins's prime areas for growth. He anticipated then that the firm would expand its US business to around 1,000 people and £250M turnover. The recent acquisition underpins this strategy and takes turnover for this year to around £150M.

This year's Consultants file, due out next week, will show that the top four firms place the US at the top of their list of expanding markets in the next two years.

But James points out that being in the US goes beyond simply chasing the TEA 21 money. 'Transportation is only 15% of Benham's business. Picking up work in this area is a bonus, ' he said.

For him, gaining access to a raft of new business in the US and building on a long term strategy is the key.

Mott MacDonald chairman Tim Thirlwall agrees that establishing a long term presence is vital to working in the US but adds: 'The transportation market is probably the best in the world - and will be for at least the next five years.

'The main constraint at the moment is the availability of resources.'

Mott MacDonald has been in the US in a serious way for the last two decades.

Thirlwall points out that it originally made the move across the Atlantic on the back of its technical expertise as showcased by the Channel Tunnel.

The firm's main business in the US is as part of the Hatch Mott joint venture, which, according to Thirlwall, gives the UK firm more project and programme management expertise. But above all, the link-up gives the local knowledge which he says is vital to getting work.

By mid April, adds Thirlwall, Mott MacDonald will have completed a deal to buy another US firm.

'We would like to make further acquisitions as you need to have engineers that are registered in that state and a licence to do business there, ' Thirlwall says. 'But more important is that clients prefer to deal with local firms.'

WSP managing director Chris Cole is also looking for acquisitions in the US, not least because he believes that having a US badge, and the perceived expertise, helps get work all around the world. 'We are looking for a well managed business that we can build on. We believe that WSP can teach them something in management and finance.'

But he points out: 'We would definitely not try to be WSP in the US - that's where people have failed. We would keep the US company identity and add value.'

This point is picked up by Balfour Beatty group managing director Malcolm Eckersall, who recently moved from Amec where he was responsible for looking after its US subsidiary Morse Diesel. He now oversees BB's two US operations, Balfour Beatty Construction Inc and Heery International.

'The opportunities are considerable but so is the competition, ' he says. 'I cannot imagine anyone being able to walk in alone and operate separately.

While it is no different from working here - you still have to have the best people in the market - the rules of engagement differ as do working practices.'

Eckersall believes the US market has raised the standard of management across the supply chain. 'I believe they are better project managers than we are. They are more attuned to a higher degree of delivery, ' he says.

He warns that because the US construction industry culture is vastly different to anything in the UK, many outsiders could come unstuck.

'It is not a gold rush, ' he says. 'If you can find an entry by creating synergies then fine. But what we should not be doing is encouraging UK firms into a market where they could drown.'

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