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Balfour Beatty expects its UK construction revenue to fall by 20% this year to around 拢2.5bn as the industry heavy weight withdraws from bidding on low margin jobs.

Reporting its results for the year to 31 December 2012 , Balfour Beatty said it expects its revenue for its UK construction business to fall 20% in 2013 鈥� down from the 拢3.18bn it reported for 2012, which was a 6% fall on 2011.

This would leave the business with revenues of around 拢2.55bn in 2013, down 35% on the 拢3.89bn the firm posted in 2009 (see graph).

Speaking to analysts last week, chief financial officer Duncan Mcgrath said that this figure contained within it an assumption of around 拢400-500m in revenue that still needed to be won, which was likely to come from smaller projects in the regional market, rather than major construction, 鈥渄ue to the time lag鈥�. 鈥淎nd that鈥檚 the market that鈥檚 fiercest at the moment - so that鈥檚 the uncertainty,鈥� he added.

Speaking to 好色先生TV, Balfour Beatty UK Construction Services chief executive Mike Peasland (pictured) said the projected fall in revenue was not simply the outcome of the shrinking construction market, but the result of a strategic decision to withdraw from bidding on low-margin high-risk work.

He said the firm expected revenue to fall to a base of around 拢2.5bn in 2013, and then grow at around 5% over the three years from 2014.

He said: 鈥淲hen we looked at our budget last year we decided we could be at 拢3.2bn [revenue in 2013] but then you look at the margins available for those kind of revenues, which  would be flat compared to 2012, and there鈥檚 no way we want to be there.

鈥淲hat we鈥檙e doing is looking at what we should be focusing on. We don鈥檛 want to be busy fools. So it鈥檚 a question of detuning the revenue to actually improve the margin take.鈥�

鈥淚t鈥檚 a strategic decision to cut back on things that are not economic for us.鈥�

Peasland said the business would focus its energies less on general building work and more on more restricted markets, where it could see operating margins of 2-3%, such as energy-from-waste projects, student accommodation, PF2 schools as well civil infrastructure. 鈥淲e don鈥檛 want to be slipping down in the range of less than 1% [operating margin], where the construction markets are,鈥� he said.

Citing the example of the 拢300m Google HQ contract tender, which Balfour Beatty were knocked out of on price, he said: 鈥淭here鈥檚 just no way we鈥檙e going to take on risk of a 拢300m job and get a return of less than 2% margin. It鈥檚 just not the right thing to be doing, so we won鈥檛 be doing it.鈥�

He said the firm would look at commercial build work 鈥渨hen there is something of benefit to us鈥�.  鈥淚t could be design and build where we think we鈥檝e got something of a niche, and maybe bidding in one of two or one of three [other firms], but we certainly won鈥檛 be doing commercial building as one of six [bidders] in a standard supply and install style bid,鈥� he said.

He added that social housing was also an area where the firm was withdrawing - a move already in November.

Peasland said: 鈥淪traight forward social housing is very depressed. The market is so poor that bidding pure supply and install in social housing in the short term is not something we want to be doing too much of,鈥� he said.

鈥淲e鈥檒l be focused on where the margins are - if we can see markets that are growing and where we have specific competencies and we can see the margins in them then obviously we will go for them more.鈥�