National companies squeeze out North East construction firms

The North East's construction industry is being crippled by a public sector procurement strategy that favours huge national companies

North East construction sector
The North East construction sector is going through a difficult period

The North East’s construction industry is being crippled by a public sector procurement strategy that favours huge national companies, the Government is being warned.

In a letter to be sent to all northern MPs and Government ministers, the three largest independent construction contractors in the region – Newcastle’s Surgo Construction, County Durham’s Esh Group and Gateshead’s Tolent – are warning that changes to the national strategy on public sector work are giving the taxpayer a poor deal and limiting employment opportunities.

“There has been a great deal of publicity about the downturn in the construction sector nationally as a result of the cuts to public sector spending,” the letter says.

“But in the northern regions, which have traditionally relied more heavily on public sector funding, the situation is much worse.”

Last year, Surgo reported turnover of £25m, while Esh Group reported £175m and Tolent £125m.

All, however, have been hit by the recession, Surgo, for example, reporting around £60m turnover in 2009.

Employee numbers have likewise dropped from 250 to just over 100.

Recently, the three firms grouped together to bid for work through the Government’s Priority School’s Building Programme.

Despite a collective annual turnover of £250m, however, the consortium did not make the 12-strong northern panel.

“We know, because we have tried, that it is impossible for firms the size of ours to qualify for a place on these procurement panels,” the letter says.

The companies are also critical of the so-called Scape Framework, used for local authority procurement, which requires contractors to have an annual turnover of over £500 million to be eligible to carry out jobs starting at £2 million.

And while local supply chains and subcontractors are meant to be used by national contractors, this does not always happen, the letter claims.

Likewise, when subcontractors are used, they often have to manage training too, as national contractors have withdrawn regional offices.

“Ten of the contractors on the northern framework panel are headquartered in the south; therefore, surpluses made on projects undertaken in the north of England all disappear straight down the M1,” the letter continues.

“This means that the north is once again left without the benefit of employment for local people, the chance to retain skills in the region or the option of reinvesting cash surpluses for training the workforce of the future.”

The letter has been signed by chairman of Surgo Construction, Ian Walker, chairman of Tolent, John Wood, and chief executive of Esh, Brian Manning.

This means that the north is once again left without the benefit of employment for local people

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