Strabag UK suffers further big trading loss

The UK arm of Austria construction giant Strabag suffered a third year of losses as the firm continued to gear up for a long term presence in the UK.

While the contractor has worked in the UK on HS2 since securing work in 2017 it set up Strabag UK in 2020 to become its main operating business here.

Last year the firm reported operating losses of £17m, after falling £22m into the red in 2022 and £2m the year before that.

Revenue almost doubled last year to £135m as its Hartlepool concrete segment factory started full production.

Andrew Dixon, joint managing director of Strabag UK, said the firm would continue to incurred high costs as it now sought to gain a foothold in the building market following the appointment of key staff from the failed Buckingham Group.

He said: “In addition to the current UK capability for the design and build of infrastructure projects and the manufacture of concrete products, we took steps in the third quarter of 2023 to enter the building sector in the UK, through a combination of employing a complete team from the demise of the Buckingham Group and supplementing it with existing Strabag employees.

“We expect this new business unit to commence tendering for building schemes in early 2024 and delivering acquired projects from 2024 onwards.”

He added: “The company is a new entrant to the market, so our activity in 2024 and 2025 will be disproportionately geared towards securing new work, rather than in balance with delivering secured backlog.

“As a result of this disproportionate gearing, the cost of bidding in 2023 and for next two years or so will be higher than for a mature business, because the margins this investment will eventually generate reflect a substantial return on investment lag.

“This is the inherent nature of an infrastructure market that has a high cost of entry.”

The firm has been in the UK since 2011 and made its first big inroads in 2017 after securing with joint venture partners Skanska and Costain main works civils on HS2.

This JV is designing and constructing 48 km of tunnels including the Euston Tunnels and Approaches and the Northolt Tunnels.

Soon after in 2018, Strabag signed a major tunnelling project for Anglo American for the potash mine in North Yorkshire to provide 37 km of mineral transfer tunnels and associated infrastructure.

Staff numbers on the books of Strabag UK are now starting to soar increasing from 824 in 2022 to 1,400 last year.

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