Strabag remains bullish about its prospects for the UK market, despite a sharp fall in profit and doubts over the profitability of its work on HS2.
Pre-tax profit at the UK arm of the Austrian civils contractor fell from almost £25m last year to just £1.8m, according to its annual report and financial statements for the year ending 31 December 2024.
However, turnover at Strabag UK grew by 40 per cent, from £135.1m to £196.9m, and its cash reserves more than doubled, from £9.9m to £20.9m.
The accounts reveal that a provision of £14m was made in relation to Strabag’s commitment to supply concrete tunnel segments for the first phase of the HS2 high-speed rail line, as one potentially loss-making contract.
“Risk factors from our risk register, resource planning and cost increases due to inflation are considered in the provision calculation,” it said.
A contract to help deliver HS2 as part of the SCS joint venture with Costain and Skanska was one of the jobs deemed “extremely poor value for money” by parliament’s Public Accounts Committee in February.
In a strategic report accompanying the latest accounts, the firm said it had continued to invest significant resources in bidding for major UK infrastructure and built-environment projects, despite stagnant demand in 2024.
However, it expected this “disproportionate gearing” towards the winning of new work to diminish this year, with the investment starting to pay off in contract awards.
It said demand in the UK construction industry throughout last year had, as expected, remained flat, narrowly avoiding negative growth.
But it foresaw a more positive market sentiment for this year and beyond, with demand buoyed by advancing technology, the energy transition and the government’s growth agenda.
Strabag UK cautioned that construction growth could be subject to a degree of uncertainty as a result of “the volatile geopolitical world of tariffs and conflicts”.
These external factors risked affecting the UK economy through increased borrowing costs, reining in clients’ capital spending plans, it said.
Strabag’s UK contracting business held no bank loans and paid no dividends, according to the latest accounts.
The firm employed a monthly average of 1,426 staff last year, up from 1,401 in 2023, and its annual wage bill grew from £103.1m to £117m.
Elsewhere in the report, the business noted that it had made “significant steps” towards establishing a building unit in the West Midlands, which it expected would develop into a national presence in the coming years.
At the start of this year, after the period covered by its latest accounts, Strabag UK was named as the preferred bidder on the £2.9bn overhaul of a critical water pipeline in the North West of England.
The firm said in its accounts that it expected to be awarded the contract by the third quarter of this year.