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School scheme signals uplift in the construction industry

THE boss of Kier Group's construction division in Scotland has highlighted a new contract to design and build a primary school in Fort William as evidence of the groundswell of optimism currently now being felt across the sector.

progRESS: Contracts in the public sector are now starting to 'filter through', with Kier picking up a number of projects. Picture: Peter Noyce
progRESS: Contracts in the public sector are now starting to 'filter through', with Kier picking up a number of projects. Picture: Peter Noyce

The £13 million Caol Campus project, which will also see the construction, services and property group develop a new community centre, multi-use sports pitch, car parking and energy centre at the site, is one of a raft of public and private sector jobs the company has on its books.

Brian McQuade, managing director of the group's construction arm in Scotland and north-east England, said more public sector work was coming on stream as finance moves more freely.

He said: "We picked up some work in Newcastle pre-Christmas for six schools, worth about £60m. That's planned investment by the government under the education funding authority.

"That's been coming, but it has been taking longer as always to get there.

"And I think we are starting to see a number of these things coming forward. It's the same in Scotland: the hub process is starting to show output now."

The hub system, overseen by the Scottish Futures Trust (SFT), divides Scotland into five areas, with public bodies in each teaming up with private partners to deliver infrastructure projects.

It usurped the PFI (private finance initiative model), which came to a halt after a hiatus in government spending around four years ago, and allows capital projects to go ahead with private finance, albeit with caps on rates of return.

Kier is one of 19 stakeholders in the south-west hub, which also includes emergency services and local councils, including Dumfries & Galloway and East Ayrshire.

Mr McQuade said Kier is currently on site with six projects in the area, where several school projects have started to emerge.

He stated: "The reason there is a bit more optimism is because these things are starting to come forward now. The SFT is pretty much the gatekeeper and [in charge of] the funding arrangements for that. They've had funding which has been released over time.

"So soon you'll see the likes of Edinburgh Sick Kids' Hospital starting. Ayrshire and Arran Mental Healthcare Hospital was awarded this week to Balfour Beatty under a similar model."

The education sector has provided Kier with a "stable" stream of work throughout the last 10-15 years, in spite of the downturn.

In Scotland it has been delivering schools across the country, including in South Lanarkshire where it has steadily been building at a rate of three to four per year for eight years.

Mr McQuade said: "Education, both in school and in colleges, has been a big feature for Kier in the UK, as has healthcare.

"There's a thing called P21, a healthcare programme. We have done about £800m under that scheme, and that includes mental health facilities, oncology units, daycare units.

"That has been the mainstay, those frameworks, along with the Ministry of Defence works. They had a bit of a stop for a while but they have placed another framework again. We are on a national framework for projects up to £50m."

Outwith public sector works, Mr McQuade has also noted a pick-up in the private projects.

He highlighted forthcoming projects in Glasgow such as Land Securities' extension of Buchanan Galleries, Network Rail's refurbishment of Queen Street station and the new Glasgow College building, which is being delivered by Sir Robert McAlpine.

Kier's construction arm also generates business by being part of the NHS Framework in Scotland, which can mean anything from a simple hospital extension to the refurbishment of new theatres.

Mr McQuade said a £1bn backlog of work has been identified by an NHS "state of the estates" document which will require to be done in the next three to four years, depending on budgets.

He noted: "Each of the individual health boards have their own estate plans, which they are now taking forward, but it is a difficult time for all of them because they have been asked to make cuts and at the same time balance the needs of providing a service.

"So there is a degree of some of the projects which have been in the pipeline starting to come through in the public sector. We're still not back to where it was in 2007 and prior to that, but it has balanced out a bit now."

Kier is currently working on the construction of a new student accommodation building for Alumno Developments in Glasgow's west end, and has internally formed a joint venture with the group's property business to bid for a major office oil giant Total is building in Aberdeen.

If it comes off it would see Kier invest in the project as well as Total, following a similar investment it made in an office development at Mount Grange in the city.

Mr McQuade said the firm had acquired the construction arm of the Stewart Milne Group two years ago, having previously found it difficult to break into Aberdeen.

Noting that Kier had secured work on the £9.5m extension of the Robert Gordon University campus, he said: "What we have found is that with that team of people the workload has not really dropped there. It has slowed down a wee bit, but not in the same regard as the rest of the UK.

"The oil and gas stuff has just sustained the need for warehouses, offices building, and the spin-offs are all to the universities and the colleges because they are all linked into these things."

Keir Group comprises construction, services and property divisions and employs more than 16,000 people worldwide.

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