Ian Tyler

With the Hatfield crash in its past and London Underground in its future, Balfour Beatty is not short of a challenge or two as it heads for its centenary. Its boss hides a steel fist in a velvet glove as he looks to take the construction firm to US success, drawing on its resilience

by Andrew Saunders
Last Updated: 31 Aug 2010

For someone whose company has just had to pony up a record-breaking £7.5 million fine for breaches of health and safety law relating to the Hatfield train crash - the highest such penalty ever imposed on a British firm - Ian Tyler has a surprising amount to feel good about. For a start, the fine could have been worse - it stood at £10 million at the close of the 2005 court case, reduced on appeal last summer. And despite the six-year run of appalling publicity that Hatfield generated, the business he heads is - whisper it - actually doing rather well.

Tyler is chief exec of Balfour Beatty, Britain's biggest and most successful construction business. And railways are only a small part of its bread and butter. The 98-year-old firm has built more than its fair share of the UK's wider infrastructure over the past few decades - the Kielder Dam, a substantial proportion of the National Grid, hundreds of miles of new road, including the largest single chunk of the M25, and several hospitals. It has been busy overseas too, with a big hand in the creation of Hong Kong's remarkable Chek Lap Kok airport, built entirely on reclaimed land, as well as the more controversial mid-'80s Pergau Dam project in Malaysia.

With 27,000 employees in 20 countries, Balfour Beatty is an international player in an industry dominated by local concerns. And Tyler is at the helm, one of our last remaining old-style captains of industry in an age when the inexor­able rise of services and the financial sector threatens the survival of the species.

We're on the captain's bridge today, an airy but unremarkable office in an '80s block near Victoria Station. ‘The best view in London,' he quips, gazing at the dour concrete edifice just across the street that fills his window. But he's not really complaining. Concrete is in his blood, and hardly a month goes by without news that Balfour has won another big contract - the £363 million East London Line deal (in partnership with Carillion) being one of the latest - requiring tons and tons of the stuff.

Part of the preparations for the 2012 Olympics, the railway scheme involves both northern and western extensions to the existing East London line. ‘It's a good example of the kind of infrastructure project we specialise in. There aren't many of them in the market at present and we are very pleased to win it,' says Tyler briskly, unsuccessfully trying to avoid sounding too delighted. No doubt, he is hoping that there will be more Olympics business in the pipeline.

But he is genuinely modest - in public at any rate. He doesn't do profiles (except for MT), he's not much of a networker and it's rare to meet someone so senior who seems genuinely unwilling to take personal credit for his firm's successes. No grandstander, his preferred modus operandi is the classic ‘under-promise, over-deliver' - and despite the continuing Hatfield fall-out and one or two other ‘local difficulties', he has been quietly making sure that Balfour delivers since he became chief exec two years ago this month.

Helped by the likes of the East London Line, as well as a £559 million PFI contract to build a flagship hospital in Birmingham and ongoing work at Heathrow airport's Terminal 5, order books are bulging, with almost £9 billion of deals - a record sum. Balfour's 2006 half-year revenues were up 20% to £2.77 billion and its profits were up 15% to £60 million (before exceptional items, of which more later). There's cash in the bank to fund tactical acquisitions - like last year's £32 million purchase of UK civil engineering business Birse - and even the City seems content: just before Christmas 2006, shares were trading well at around 432p each, only a few pennies short of the year's high of 437.25p.

For Tyler, a qualified accountant who joined Balfour as FD in 1996, the relentless upward march of the firm's numbers must be a source of deep satisfaction. As must the progress of his own personal ‘key financial indicator' - his total salary in 2005 was £626,317, up from £476,769 the year before.

To top it all, Balfour Beatty was voted - by those least forgiving of judges, its own competitors - ‘Britain's Most Admired Company in the Construction sector' in MT's prestigious annual poll last month.

It's a remarkable rehabilitation by any standards, when you consider that only a few short years ago, things were looking very bad for the firm. As the London-to-Leeds express train thundered towards the Hertfordshire town of Hatfield at 115mph shortly after noon on 17 October 2000, it passed over a badly damaged rail which, according to later reports, simply disintegrated under the strain. The subsequent catastrophic derailment killed four and injured another 100. The accident was caused by a type of metal fatigue known as gauge corner cracking, and it happened on Balfour Beatty's patch, a 31-mile stretch of line for which the firm's rail maintenance division was responsible.

The accident precipitated a huge crisis in the nation's rail network, as speed restrictions were imposed after the discovery of hundreds of potentially similarly flawed rails. And as the full details emerged, it would also leave Balfour Beatty facing public opprobrium with charges of manslaughter - later dismissed - levelled at both the firm and at two of its managers.

There had been five other fatal incidents since 1995, and the Ladbroke Grove crash - which killed 31 in 1999 - was particularly fresh in people's memories. Hatfield was the straw that broke the camel's back. It exposed systemic flaws in the rail industry as a whole, dating back to privatisation in the late '80s.

The firm eventually pleaded guilty to health and safety charges, leading to the imposition of that original £10 million penalty. Mr Justice Mackay, a 30-year veteran of H&S trials, said in his summing-up in 2005: ‘I regard Balfour-Beatty as one of the worst examples of industrial neg­ligence in a high-risk industry that I have seen.' That must have hurt.

‘Hatfield was a crisis for the business - in fact, several crises over the course of several years,' admits Tyler, contrite but keen to stress that he was the FD rather than CEO at the time. ‘It was and is a hugely complicated situation, but first and foremost people died as a result of something that we were part of. We did go wrong.'

That said, he is emphatic that the Balfour Beatty of today is changed very much for the better. ‘The way we are, the way we operate across all of our markets, is fundamentally different because of what happened. We are stronger and very highly attuned to the risks now, more so probably than other organisations.' The company doesn't do rail maintenance any more either - it only builds new lines.

‘My job - which I will do to the very best of my ability - is to get us to the point where these accidents simply cannot happen.' A tall order, but he is convinced it is the way to go, and good business, too. ‘I genuinely believe we can do it. Society requires us to be safer every year, so if we are the safest contractor, we can offer a better-quality service which people will pay more for.'

Tyler is likeable, chatty, a regular guy - a no-nonsense chap in a no-nonsense industry. ‘I'm not an extrovert, I don't relish the idea of pushing myself forward. And the culture of the firm is one of getting on and doing things rather than talking about it. We're understated but our customers have the confidence that we'll deliver. I'm very comfortable with that.'

Quiet he may be, but he certainly doesn't lack drive or ambition, as his deft climb to the top of Balfour's greasy pole confirms. Even when seated, there's a restless energy about him. Throw in his fair skin, boyish enthusiasm and ready smile, and the young Neil Kinnock comes to mind.

Despite being a former career FD who claims not to have been after the top job, he has slipped very comfortably into the role. He has, cannily, learned to leave his bean-counting background behind and doesn't talk numbers too much. In fact, he hardly mentions his cash position, debt/equity ratio or Ebitda; as the top dog, he has people to do that sort of thing for him now.

But in contrast to many bosses in a self-sufficient industry, he has never wielded so much as a theodolite or spirit level in anger, much less swung a pickaxe or laid a brick. ‘The idea of me being an accountant is something that I think both fascinates and appals the rest of the industry,' he says. ‘Probably more the latter than the former. But I believe that the basics of management are the same in any industry. You don't have to be able to play the violin to conduct the orchestra and you don't have to know how to build a bridge to run a construction business.'

In fact, he is in good company: the firm's co-founder Andrew Beatty was a chartered accountant, too. The other half of that 1909 partnership was one George Balfour, a Scottish engineer in the McAlpine/Stevenson mould. The firm was soon busily engaged in building many of the numerous Scottish hydro-electric power schemes of the inter-war years. From the '50s on, it earned an international reputation as a builder of dams, tunnels and railway infrastructure, including the second Blackwall road tunnel under the Thames, the aforementioned Kielder dam in Northumberland and the £350 million Mina Jebel Ali port in Dubai.

If Hatfield was the kind of calamity that would have reduced lesser firms to rubble, the remarkable thing about Balfour is how little it seems to have upset the running of the rest of the group. It's partly a testament to tough and incisive management and partly a reflection of the nature of the organisation, says Tyler. ‘Firstly, our size makes us resilient. Secondly, the management provided strong leadership; a huge effort was made to communicate. If you can get the message through that the world isn't going to fall down, then the crisis can be managed. It's difficult and unpleasant, but you can get through it.'

In fact, the firm was in the midst of a turn­around at the time of the crash, having just de-merged from troubled parent BICC. ‘The thing that really fascinated me about Balfour at that time and the reason why I joined was that it was genuinely a turnaround. In the mid-'90s as a subsidiary of BICC it was struggling and losing money in lots of areas. But it had some strong market positions and there were nuggets of core value there, mostly in teams of managers a few levels down who really did know what they were doing and could form the basis for growth.'

So what exactly did he do? ‘We did what you do with any turnaround: apply the basics of management. You look at what drives value and what detracts from it, you promote the former and stop the latter.' And, he adds emphatically: ‘In this business in particular you keep the egos of the management in check.'

For construction is an industry whose very nature can breed over-confidence. It's peopled by tough, resourceful and self-sufficient characters, taught to meet problems head on and rely on their own judgment. These are all estimable qualities when you've got a bridge to build or a tunnel to bore, less so when required to coolly assess corporate strategy and run the numbers.

‘When you're out on site, you've got to get the job done, you've gotta build it - you need aggression and confidence. But you don't need an ego that is pushing you to take decisions which are demonstrably not in the shareholders' interest,' he adds, a glimpse of steel showing through the geniality. You wouldn't last long making those kinds of decisions on Tyler's team.

Son of a cost-of-works accountant turned college lecturer, Tyler is a proud product of the state system. He left school at 16 and is clearly used to fending off digs aimed at his unglamorous alma mater. ‘Ringwood Comprehensive - you've probably heard of it,' he jokes, a touch defensively. From 16 to 19 he worked in a bank, because ‘I wanted to earn some money', before going back to education, reading commerce at Birmingham University. At this stage, he says, ‘The fact that my father had been an accountant shamed me. I was determined not to become one myself.'

And so, of course, he ended up at Arthur Andersen. ‘I realised that the great thing about accountancy is that you don't have to make any decisions. You can decide what you really want to do in later life.'

After six years at Andersen, he moved to a finance role at the now-defunct Storehouse Group, then a high-street dynamo with names like Habitat, Bhs and Mothercare in its port­folio. He stayed for three years, enjoying the immediacy of retail after the orderly world of ‘the profession'. But he couldn't, he says, see himself making a career out of it. ‘It was great fun, but there wasn't enough hard graft and real management involved to keep me interested.'

Not something that could be said about his current job. Tyler is a hard worker who spends long hours in the office and travelling, especially in pursuit of his American dreams. ‘I travel more than I want to. It's easy to get sucked into America, especially with the problems we've had there.' Ah, the lure of the US. Balfour is hardly alone among British firms, either in its desire to crack the beguilingly huge stateside market or in its struggle to actually do so. In 2001, it acquired the National Engineering and Contracting Com­pany, a deal intended to give the firm ‘traction' in the civil engineering sector there.

Despite Tyler's best efforts, it has yet to do so - back in August he announced a painful £17 million writedown on his poorly performing US business (this is the ‘exceptional item' referred to earlier, one of those unfortunate events that firms prefer to account for outside of their regular quoted profits). In order to rescue the situation, he has said, he is going to have to cut its $200 million turnover in half by focusing carefully on which deals to bid for. He's optimistic that they've turned a corner there now.

It's doubly tricky to succeed abroad, because construction is an essentially local industry. It's easy to talk about globalisation when you make software, soap or teabags, but when your product requires thousands of tons of concrete, steel and glass, the prospect of shipping it all halfway round the world gets a bit more challenging.

‘Globalisation is not a relevant phenomenon in the construction industry. The supply chain is fundamentally local. But, realistically, we are going to run out of headroom in the UK,' he says. ‘The long-term growth of the business depends on creating the same levels of market strength that we enjoy at home, outside the UK.' Despite the considerable difficulties involved, the US is the obvious place to go.

From Storehouse he took a step closer to his final destination, moving in the early '90s to the home of Maggie Thatcher's favourite tycoon, James (later Lord) Hanson. ‘A company from over here that's doing rather well over there', as the old flag-waving ads had it. But by the time Tyler joined, the swashbuckling days were over and Hanson had shrunk back to its building materials roots. ‘It was a strange business, which worked largely because Lord Hanson gave a lot of people a good deal of autonomy.'

It's easy to picture the cavalier, ruthless Hanson and the pragmatic doer Tyler failing to hit it off. ‘I think I only spoke to Hanson twice in all the time I worked for him, and on one of those occasions the sole purpose of the conversation was for him to tell me that he thought I was vastly overweight.' Lean and fit-looking, if he was obese then, he certainly isn't now.

But Tyler has broad shoulders and carries old gripes as well as new pretty lightly. He needs to. Just as it was looking like the firm might finally be emerging from the post-Hatfield black hole, a new rail-based millstone emerged to take its place: the London Underground. Balfour has been involved in the Tube since the publicly owned glory days of the '50s, but its current role is as part of the Metronet consortium, respon­sible for maintaining and improving the lion's share of the network under the PPP agreement.

Worth £9 billion in total and running over 30 years, the PPP is on the face of it a lucrative long-term moneyspinner. But delays, overruns, service disruptions and a pretty comprehensive failure to meet its station renewal targets have earned Metronet a £2.5 million fine (yes, another one…) not to mention the wrath of everyone else involved - exasperated commuters, LU managing director Tim O'Toole, Transport for London commissioner Peter Hendy… Even London mayor Ken Livingstone has waded in, threatening to kick Metronet off the contract unless things improve.

Tyler is sanguine about the problems, as you have to be in an industry where practical problems arise daily. ‘There is always variability in any project. There is so much about Metronet that is complex and difficult that its performance will inevitably go up and down. It will have crises because it's big and complicated, and the Evening Standard will be all over it when that happens.'

Born in Wells, Somerset, he lives in Surrey these days (‘my mother-in-law lives in the west country, so we had to move away,' he says, deadpan), with his wife and two daughters. He spends as much time as he can with his family. ‘I don't stay in London during the week, I do get home. And I try to keep weekends free, otherwise I end up never seeing them. But it's not perfect.'

If the Tube is proving a tough nut to crack tactically, it has its strategic compensations for the rest of the group. The experience of working under the Public Private Partnership is invalu­able. Balfour is already an old hand at UK PPP and PFI deals - new hospitals in Birmingham and Edinburgh, plus various schools and road projects. Given that 75% of its revenue currently comes from the UK, many City analysts see the key to Balfour's future prosperity in the firm's ability to take this expertise overseas.

It's a means of funding infrastructure that has attracted sustained criticism over whether it's good value for taxpayers' money, but Tyler thinks it's here to stay. ‘It does create inflexibility, and that needs to be addressed. But it can be a very effective form of procurement. It has delivered a major hospital building programme that could not have been done any other way.'

What's more, he says, it is definitely catching on abroad. ‘All of the European countries are looking at PPP or something like it. We're already bidding on one in Germany, and the US is doing all sorts of different things regionally. I just hope we can keep on moving ahead of the curve, that's the real trick for us.'

If he can, Balfour Beatty will have real cause to celebrate its centenary in 2009.

Three challenges facing TYLER

1 To continue his successful expansion overseas, but without taking any more baths like last year's £17 million writedown on Balfour's US civil engineering business

2 To capitalise fully both at home and abroad on his firm's Private Finance Initiative and Public Private Partnership management expertise

3 To make fatal accidents involving his company - whether affecting employees or the public - a thing of the past

Tyler in a minute

1960 Born 7 July, Wells, Somerset. Leaves Ringwood Comprehensive at 16 to join a bank

1979 Studies commerce at Birmingham University

1982 Joins Arthur Andersen, qualifies as an accountant 1988 Group treasurer then financial controller of retail group Storehouse

1991 Group financial comptroller, Hanson

1993 Finance director of Hanson subsidiary ARC

1996 Joins Balfour Beatty as financial director

2002 (August) COO, Balfour Beatty

2005 (January) made CEO, Balfour Beatty

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