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London-based builder Balfour Beatty hasn’t experienced any disruptions from regime change in Washington, but it is keeping an eye on tariffs coming from the U.S., CEO Leo Quinn told listeners during the company’s 2024 full-year earnings call on March 12.
“The one area we are focused on is actually the tariffs,” Quinn said on the call. “You know, when someone puts steel up by 50% from Canada, we need to be careful because we carry a big backlog, and it all goes into the subcontract base.”
The looming threat of tariffs — blanket cost hikes on goods from Canada, Mexico, China and the European Union and further increases on certain materials, such as steel and aluminum — has put contractors in a difficult position. Builders are now adjusting contracts for protection from sudden cost jumps and stockpiling materials to get ahead of prices.
Quinn, who is stepping down as CEO in September, said in response to a financial analyst’s question that Balfour Beatty would likely act as a “conduit” in the brewing trade war, passing costs down first to subcontractors, and then to clients.
“Now, our risk doesn't sit with us, it sits with the subcontract base, and, for reasons of change of law or certain terms and conditions, it flows back to the customer,” Quinn said.
However, problems could crop up if a subcontractor goes bankrupt, whereupon the liability could reverberate back up the chain. Quinn said the firm was managing the situation carefully, and ensuring that subcontractors are bonded and secured to decrease its own risk.
Philip Harrison, the company’s CFO, added that bonds or insurance would be the company’s fallback plan, should a subcontractor go bankrupt.
“Our risk is always schedule, not the subcontractor going bust,” Harrison said.
The numbers
The contractor reported a 2024 pre-tax profit of 214 million pounds ($277 million), down 12% from 2023’s 244 million pounds, according to a March 12 news release detailing the company’s financial results.
Harrison pointed to a small number of delayed U.S. civil jobs that continued to drag on that unit’s profitability. Revenue from the firm’s overall U.S. construction business shrank 2% in 2024 to 3.6 billion pounds.
“As we progress through these delayed civil projects, we expect U.S. Construction PFO to improve in 2025,” Harrison said, referring to the firm’s profit from operations.