Balfour Beatty and UK public-private partnerships after 2008

Balfour Beatty UK

The multinational infrastructure PPP firm

The rise of the public-private partnership (PPP) during the onset of the global financial crisis in 2008 is most representative of market activities in the infrastructure investment sector. Appropriations linked to economic and fiscal policy in the UK since this period has had influence on the steering of PPP projects and the strategies designed by participatory entities. Conversely, the PPP relationship to infrastructure in urban planning has been nothing short of formative in the articulation of new terms to the future tax and economic foci of Britain' fiscal and monetary policies.

At the forefront of this recent history, is the UK construction and investment company, Balfour Beatty. A leader in the PPP sector, the firm offers exemplary case study to assessment of how government policy has affected one of Britain's previously cash flush business climate. Infrastructural projects are now met with unique obstacles. Much of this constraint is related to the recent policy changes in the UK's economic and fiscal budgetary strategies. The foregoing discussion reveals how variations in the business cycle inevitably have profound effects on economies of scale, and the overall performance picture of multinational enterprises. Balfour Beatty's presence on the scene of Britain's market during the reform of national economic policy in 2010, with forces of global market capitalisation is the subject of this analysis.

With the publication of Matthew Taylor's (2008) Living Working Countryside: Taylor Review of Rural Economy and Affordable Housing report a new era in PPP development seemed to be underway. New market construction and investment by private entities had a huge impact. Effectively made defunct in the wake of budget cuts, Taylor's proposal for a sustainable Britain could now only be met by PPP designation of projects attributed to the oversight of private investment firms. Devolution of public finance for housing projects has had deep effects in the construction market, and of course start-up on projects in the public housing sector. Communities under Quango management also fell short due to elimination of administrative funds to the UK's nongovernmental organisations. The Taylor Report's importance as Britain's future model of sustainable infrastructure has been the subject of much debate since announcement of the 2010 Budget.

The spirit of equity within the sustainability message described in the Taylor Report continues to have influence in investor decision, however. Recommendation 5 to the 2008 Report articulates the enforcement of rules and incentives to planning projects, 'The Government should review the regulatory burdens and incentives placed upon local planning authorities which focus planning departments on short-term delivery targets and development control, to ensure that addressing these short-term requirements is more strongly supplemented by support for planning for communities in the longer term' (Taylor Report 2008).

Little did Taylor know that at the time of his Report, the shift in the global economy was soon to preempt regulatory infraction on planning, and greatly reduce incentives to the point that they dissipated into thin air.

When UK HC 451: Budget 2010: Securing the recovery Economic and Fiscal Strategy Report and Financial Statement and Budget Report March 2010 was reviewed by the House of Commons, definition of the future of the UK's national monetary and fiscal policy was laid forth with special provision. Characteristic of 21st century budgetary priorities, the 2010 Report targets maintenance of macroeconomic stability, reform of financial services, support measures for business growth, rules to equitable distribution and provision to rights to opportunity, guidelines to protection of public services and securitisation of low carbon growth as the core priorities to UK economic and fiscal strategy.

Change to the financial and housing sector on the public finances reflects record of the UK's financial crisis and risks caused to the national economy during the global downturn. The flux in economic growth has particularly affected the financial and housing sectors in Britain; sectors that are a particularly important source of tax receipts (UK HC 451-2010, p. 201). Historically, financial company corporation tax has accounted for approximately 25% of overall corporation tax (£10 billion in 2007-08), including income tax and NICs on salaries and bonuses (UK HC 451-2010, p. 201).

For companies involved in both the investment and construction industries such as Balfour Beatty, this has double impact in that the housing sector provides revenue directly through stamp duty (UK HC 451-2010, p. 201). Prior to the economic crisis leading up to the 2010 policy, the financial and housing sectors saw rapid growth in activity and asset performance, with 'the rise in housing and financial sector receipts from 2002-03 to 2007-08 account[ing] for half of the increase in total current tax receipts over [the] period' (UK HC 451-2010, p. 201). An estimated 2ae % loss was sustained by the financial and housing sectors record of GDP in 2009-10, with a considerable structural decline in tax receipts. Fiscal policy reflects trend output growth at a quarter of a percentage point lower than the centre of the forecast, with economic projections on public finance also subject to percentage point changes (UK HC 451-2010, p. 201).

Supplying construction to the housing sector and infrastructure support services to maintenance of commercial and community investments, Balfour Beatty is a global leader in new market sustainable building. A key strategist to Britain's PPP agenda, the Company's activity on the market involves interests in '31 concessions in the UK, 18 in the U.S. And one in Singapore' (Balfour Beatty 2011). Also a vital force in PPP markets abroad, Balfour Beatty sees 'major growth opportunities in the U.S.' with its front position in the military housing market, the Company is 'well positioned to undertake privatisation projects in other sectors' (Balfour Beatty 2011).

Approximately half of reported revenue comes from outside the UK with over 30% from the U.S. And around 15% from the rest of the world. Share prices to the Company's performance in 2011 continue at a profit (Figure 1).

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7. Power 8. Roads 9.Rail 10. Water

In 2004, the Balfour Beatty expanded its presence in Hong Kong with purchase a 50% acquisition of Gammon Construction from new market competitor, Swedish Firm, Skanska. Part of an echelon of construction and investment development firms the Group reflects the social responsibility approach toward conducting business with its customers and suppliers. At Balfour Beatty, 'Sustainability is collective responsibility' (Balfour Beatty 2011). With a vision of infrastructural projects as long-term investment, the scope of those PPP activities strengthens the Company's brand identity and market position based on a mission dedicated to social, environmental and economic impact. This is, of course, supported by 'excellent financial performance' and a strong cash position, as the Company and the Country work together to 'face future with great confidence' (Balfour Beatty 2011).

Conclusion

Founded in 1909 by George Balfour, a Scots mechanical engineer, and Andrew Beatty, an English chartered accountant Balfour Beatty described is vision as a 'general and electrical engineers, contractors, operating managers for tramways, railways and lighting properties and for the promoting of new enterprises' (Balfour Beatty 2011). The controlling interest in the construction of the public tramway system in Dunfermline in Fife at £141,450 and subsequent oversight of engineering and maintenance, the Company also continues its tradition as a direct investor in transportation infrastructure. Ranked 19th in the international league table of contractors, the Group is 'the largest fixed rail infrastructure contracting company in the world' (Balfour Beatty 2011).

Connecting urban metropolis to countryside, and Brits to the globe, Balfour Beatty's current UK holdings include shares in Blackpool and Exeter International Airports and Barking Power Station (Balfour Beatty 2011). As the UK ramps up to meeting Kyoto Protocol GHG emissions reductions targets, Balfour Beatty's leadership in energy saving, public transport infrastructure projects will contribute significant capital and knowledge to carbon reduction and performance of those national PPP entities in the UK and international emissions trading market. The Company performs on its commitment to 'new markets in the low-carbon and resource-efficient economy of the future', and hopes to drive business growth (Balfour Beatty 2011). Policy innovations are sure to follow.