Economy

Rail reality: Once again Europe takes the lion’s share

BY Walter Ellis | Waltroon   /  17 July 2017

Some months ago, I wrote a piece for Reaction in which I praised the role played by British investors and construction companies in building London’s Crossrail, one of the biggest and most visionary engineering projects in Europe.

It’s not as if foreign contractors weren’t heavily involved. They were, including most of the usual suspects, led by Bechtel of the U.S. But British expertise remained very much in evidence, notably that of Morgan Sindall, which built the tunnels under the Whitechapel and Liverpool Street stations.

Today, seven years on from the award of the Crossrail contracts, we have seen the start of the roll-out for HS2, the high-speed rail link between London and Birmingham, with future extensions to Manchester and Leeds.

In summary, about half the work will go to British companies and the rest to rivals, mainly from France. Carillion, the struggling UK giant, which last week lost some two thirds of its share value, and Balfour Beatty will largely hold up the British end. Between them, they employ close to 70,000 workers and can expect to hire more during the life of this latest project, which, including the northern extensions, is expected to last at least 20 years. Three more British bidders, Costain, the Kier Group and McAlpine, bring up the British rear.

Last year, Morgan Sindall was awarded a side-contract to prepare sections of the terrain ahead of the main civil engineering work, including site clearance and the setting up of construction compounds. Arup, which did much of the preparatory work for the Channel Tunnel link, had already been retained on a consultancy basis.

Now consider the European input: VINCI construction, Bouygues and Eiffage, all French; Skanska of Sweden; Strabag of Austria; and Volker Fitzpatrick of the Netherlands. VINCI is the biggest civil engineering company in the world, which recently extended the existing TGV line from Paris to Tours all the way to Bordeaux. Bouygues Construction is a specialist company (part of the vast Bouygues Group), which already does 70 per cent of its business outside of France. Eiffage, the fifth-largest construction company in Europe, built the high-speed connection between France and Spain. Skanska, responsible for 30 St Mary Axe (the Gherkin), has a growing presence in the U.S. as well as the UK. Strabag, with a workforce of 76,000, is a key player not only in Austria and Germany, but increasingly in the Middle East and Asia. Finally, Volker Fitzpatrick – the name resulting from the takeover of the long-established British firm, Fitzpatrick, by VolkerWessels of Rotterdam, in 2004 – built the Gateshead Millennium Bridge and, even more notably, the huge storm surge barrier that protects the southwestern province of Zeeland from potentially calamitous floods.

Between them, these European heavy-hitters have more experience of high-end railway projects to be found anywhere else in the world outside of China and Japan. Should Carillion – which earlier this month enlisted the services of EY (formerly Ernst & Young) to help it bring spiralling costs under control – falter, there will be no shortage of rivals ready to take its slot.

None of this means that the British companies involved in HS2 will not do a first-rate job. They are experienced and know the territory. But it is revealing that, once again, when it comes to really big infrastructure schemes, Britain feels it has to look abroad before it can give the go-ahead for building to start. It will be interesting, in the next year or two, to see which home-grown partners are involved in Crossrail 2, the proposed north-south route running from Surrey to Hertfordshire via Kings Cross. Looking further ahead, HS3, the mooted line from Liverpool to Hull, via Manchester and Leeds, will be another project to watch. Will UK companies, having profited from previous experience, rule the roost, or will European names continue swooping in to take the richest pickings?

It doesn’t end there, of course. Foreign boardrooms, shareholders and engineers are not the only ones who stand ready to cash in massively on Britain’s infrastructure boom. Paul Nowak, deputy general secretary of the Trades Union Congress, yesterday described the HS2 announcement as “a shot in the arm for Brexit Britain”. Whether that meant he backed Brexit is hard to say. But of the 16,000 jobs that are expected to be created during the first phase of construction, how many will go to British workers?

Just this month, Brian Berry, chief executive of the Federation of Master Builders, warned that his members could not afford to see tighter controls imposed on the recruitment of skilled workers from the EU. Some 400,000, mainly British, labourers had left the industry after the economic downturn in 2008 and had not returned. Their places, he said, had been taken by new recruits, mainly from Poland, Romania and Lithuania. So do not be surprised to learn in the years to come, regardless of the outcome of the Brexit talks, that immigrant workers from Eastern Europe and Ireland make up as much as a quarter of the HS2 workforce.

Britain has no problems announcing grand, multi-billion pound schemes. Our leaders have an admirably clear vision of how the country should look in the later decades of the 21st century. The problem is that, in stark contrast to our performance in the age of steam, we have to look abroad if we want to get the job done. Brunel must be turning in his grave.