Balfour Beatty vs Carillion: A tale of two builders

Both firms faced the same problems, but why has Balfour been able to thrive when Carillion failed?

by Stephen Jones
Last Updated: 14 Mar 2018

It is August 2014. Balfour Beatty, Britain’s biggest construction firm, has narrowly survived a failed month-long takeover bid by its smaller competitor Carillion.

Bogged down by legacy issues - caused largely by a stockpile of low margin contracts it accepted following the financial crash - and having suffered eight profit warnings in just two years the group was in rather sticky concrete.

Fast forward three years and six months later and the companies have followed two very different paths.

Following a rapid six-month decline - arising from similar legacy issues - Carillion collapsed in January 2018 in a heap of unpaid debt. In contrast Balfour has just announced a huge pre-tax profit jump to £117m in 2017, and a doubling of underlying profit.

But why have two had such differing outcomes? Their contrasting fortunes boil down to a simple willingness to address internal issues.

Smelling the coffee

While Carillion failed to keep an eye on its balance sheet, continuing to accept unprofitable contracts and overestimating their value, Balfour enacted a programme of reform to directly address its own.

Shortly after the takeover bid, KPMG was called in to carry out an in-depth review of operations, CEO Leo Quinn was appointed in January 2015 and in February of the same year the contractor announced the implementation of it’s ‘Built to Last’ business transformation programme.

A large part of this has involved streamlining operations, for example selling off assets in the Middle East and stakes in the M25 Connect Plus consortium, re-organising some areas of leadership and greater diligence when acquiring new contracts.

Of course there have been some negatives, largely in the guise of a one-off £44 million legal provision to cover Carillion’s share in the Aberdeen Western Peripheral route joint venture (which the Balfour board conveniently decided to account for separately.)

But it’s likely Quinn won’t mind too much - after all he still has a firm to take into the future. Carillion on the other hand simply didn’t learn. Bosses continued to drive blindly into unfeasable contracts, they refused to smell the risk management flavoured coffee and ultimately paid the price.

Experts want the industry to take the Carillion collapse as a wake up call, but Balfour has been awake for some time. This project is well on its way to completion.

 Image credit: Shutterstock/igorstevanovic 


Stephen Jones recommends

Why Carillion collapsed

Read more

Find this article useful?

Get more great articles like this in your inbox every lunchtime

"One of the biggest faults of the European ecosystem is founders sell out ...

Management Today meets Perlego founder Gauthier Van Malderen.

How CEOs can improve sales

“Hitting those sales targets no longer sits with sales teams, instead it should start and...

Tony Soprano & how leaders get trapped in bubbles

Beware people telling you what you want to hear, say the MD of Merryck &...

Micro-breaks improve performance

Managers should take a more relaxed approach to tired team members, according to a study....

How to work with someone you don’t get on with

One minute briefing: Professional mediator Clive Lewis provides his top tips for navigating conflict with...

The most powerful thing you can say as a leader is "I don’t ...

Q&A: Moneypenny’s Joanna Swash on empowerment, M&A and the future of work.