Adonis attacks builders over high margins

A ROW over construction companies’ “indefensible margins” has broken out between the industry and the head of the body overseeing the infrastructure strategy.

Lord Adonis, chairman of the National Infrastructure Commission, has attacked the profits large engineering and construction businesses make on public contracts. The former Transport Secretary was speaking in reaction to industry publication Construction News’s annual ranking of the performance of the sector’s largest 100 firms.

It showed the 10 biggest groups in the sector made an average pre-tax profit margin of negative 0.5pc as losses from problem projects hit their performance. “I’m not worried in the slightest about the reduction in margins for major and extremely well-resourced contractors,” Lord Adonis said, speaking to Construction News.

“I think it’s a sign that the public sector is getting a good deal at last. Indefensible margins have been cut down to size, I’m not concerned at all.”

However, contractors hit back, warning that current profit levels were not tenable. Mark Reynolds, the chief executive of Mace – one of the biggest companies in the sector which has worked on projects such as HS2 and the Shard – said: “Lord Adonis’s comments aren’t helpful.

“The construction industry is facing a perfect storm of higher material costs, labour shortages, low productivity and unsustainable margins.”