Balfour Beatty is keen to be involved in the new government’s potential use of private finance for infrastructure projects, its chief executive has said.
Speaking to analysts yesterday (14 August) after the publication of the contractor’s half-year results, Leo Quinn said he “would love to use our expertise” in the area.
Asked about getting involved with private financing at a question-and-answer session, Quinn said: “We would love to use our expertise in PPP [public-private partnerships]. I don’t think it will ever be called PPP [again], it will come in another form, but we would love to use to expand into the right opportunities.
“The challenge is how they would want to bring it to market, because the old PPP was a fairly expensive way to fund infrastructure so they may be looking at a different financial model. I can’t comment because I don’t know the detail on it.”
Balfour Beatty was a well-used contractor and regular investor under the previous PFI regime, and still holds a portfolio of PFI investments, including Connect Plus, the M25 maintenance and upgrade company.
Asked further about how he sees future involvement in such financing, Quinn said it was too early to say because he doesn’t know what the government is going to do.
He added: “I think the direction of travel is positive. We certainly want to be involved in that, where our capabilities match.”
He said that due to the high cost of equity for Balfour Beatty, future PPP schemes would need to be “something which is tied up with construction delivery for us to be competitive”.
There has been a recent rise in legal disputes relating to old PFI schemes in recent years. Last month, Construction News examined why this has been the case.
Prior to July’s election, major contractors including Balfour Beatty and Morgan Sindall demanded a new financing model from the next government to drive private investment in infrastructure.
The Financial Times reported on Tuesday that chancellor Rachel Reeves is considering a plan that would see the £9bn Lower Thames Crossing (pictured) funded by a new form of private finance initiative (PFI).
Sources told the newspaper that investors could receive returns either indefinitely or on 125-year contracts under the potential plan, which would be similar to the regulated asset base (RAB) model used in the water sector.
Under RAB, investors pay to build schemes and receive returns through higher charges on utility bills.
A Treasury spokesperson said that the PFI model that was used from the mid-1990s until 2018 remains retired.
But they added: “The government is committed to harnessing private investment and restoring growth and will work in partnership with the private sector to deliver its missions.”
In January 2023, National Highways awarded Balfour Beatty the to connect to the Lower Thames Crossing.
But the future of this deal depends on whether the overall scheme receives a development consent order.
And the Labour government, which has cited a £22bn spending gap left by the previous Conservative administration, is set to consider the Lower Thames Crossing and all other transport schemes in its forthcoming spending review.
Quinn spoke after making a presentation showing Balfour Beatty’s worldwide revenue rose to £4.7bn in the six months to 28 June 2024, compared to £4.5bn in the same period last year.
Its total pre-tax profit was £112m, up from £82m in the same period last year.
UK turnover was £1.46bn, down from £1.52bn in the same period in 2023. Its underlying profit margin grew from 2 to 2.3 per cent, however.
Asked about expectations for its future margin level, Quinn highlighted a difference of opinion with chief financial officer Philip Harrison.
“I’m confident that the business has the capability to deliver a 5 per cent return. Phil, on the other hand, thinks that 3 [per cent] is euphoric,” Quinn said. “We have a difference of opinion about what the potential of the business is.”
He added: “I would be very surprised if a blind man with a white stick couldn’t deliver 3 per cent in 2026.”
