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Underbidding by contractors is so rife that 2011 will see more Connaught-style collapses, the chairman and chief executive of Wates has warned.

Paul Drechsler was speaking as the company announced a 4% increase in turnover and a 12% boost in profits.

Drechsler said: 鈥淭he level of underbidding makes it more certain that we will have very dissatisfied customers or failed suppliers.鈥�

鈥淭here will be further failures in the next 12-18 months. The bidding in some areas - I don鈥檛 understand it,鈥� he said.

Wates managed to grow its turnover slightly during 2010 from 拢945m to 拢985m on the back of its social housing arm, Drechsler said, and despite the cancellation of the BSF school building programme Wates had a 鈥渟trong year鈥� in education.

Pre-tax profit grew from 拢38.9m to 拢43.5m, while Wates鈥� order book stood at 拢2bn.

鈥淲e are cautiously optimistic for 2011,鈥� Drechsler said. 鈥淲e expect to continue to grow and be successful in our social housing arm and in education. Yes the demand is less but there are still opportunities,鈥� he said.

Drechsler did not rule out acquisitions but distanced Wates from acquiring major consultants to offer more services to clients. This was a strategy pursued by rival Costain, which unsuccessfully attempted to buy consultant Mouchel in a series of offers over the past four months.

He also said that the firm would be 鈥渙pen鈥� to expanding with partners across the Middle East from its base in Abu Dhabi.