Balfour Beatty wins London Olympic stadium West Ham building contract

Construction firm boosted by £154m deal to convert arena into football club's new home and multi-purpose venue by 2016

Balfour Beatty has won the £154m contract to convert London's Olympic stadium into the new home of West Ham United, in a fillip for the construction firm's struggling UK business.

The project will employ up to 400 people at its busiest, as Balfour Beatty turns the 80,000-seat Queen Elizabeth Olympic Park into a multi-purpose venue taking in sport, cultural and community events by 2016. Balfour Beatty's work will reduce the stadium's capacity to 54,000 and install retractable seating to cover the athletics track.

The stadium in Stratford, east London, will also be the new national competition venue for UK athletics and will have a separate community athletics track. It will stage five games for the 2015 Rugby World Cup before West Ham move in.

Stephen Rawlinson, an analyst at brokers Whitman Howard, said the deal put the company in line for work at the 2022 World Cup. "It's a good win for Balfour Beatty and it may be that it's a useful calling card to build stadia in Qatar for the 2022 World Cup. We are positive on Balfour Beatty for the long term, but want to see better signs of recovery and renewal."

The contract is a shot in the arm for Balfour Beatty's biggest market. The UK side of the business was largely responsible for two profit warnings and a plunge in first-half underlying profit last year. A review found that poor project management and uncompetitive bidding had helped to lose £50m in profit.

The business has since undergone an overhaul, with new management brought in and contract terms tightened up to head off demands from aggressive customers.

Balfour Beatty said in November that annual profit would beat forecasts but that its UK construction business remained starved of the large infrastructure projects that are its traditional big earners.

After sustained calls for infrastructure spending by business groups, the government in December announced £100bn of spending on roads, rail and other projects, but most works will not start before 2015.

As a result, Balfour Beatty is looking to overseas markets such as the US and the Middle East for growth, with Qatar one of the targets.

Balfour Beatty built the Olympic Park's aquatics centre and its roads and bridges in preparation for the games. Last summer, the company was awarded the £41m contract to extend the stadium's roof to make it the largest cantilevered roof in the world. The roof project is part of the total contract for transforming the stadium.

Balfour Beatty said it would employ about 30 apprentices to work on the stadium and employ people from Newham, one of London's poorest boroughs, where possible.

Andrew McNaughton, Balfour Beatty's chief executive, said: "We are delighted to be continuing our activity at the Queen Elizabeth Olympic Park. During construction, our firm commitment to the use of local labour and the creation of apprenticeships will continue to benefit the local community and the wider industry."

The stadium contract was awarded by a joint venture controlled by the London Mayor's London Legacy Development Corporation and Newham council. West Ham will pay £2.5m a year in rent and a one-off fee of £15m to the joint venture.

The future of the stadium was decided last March when West Ham, currently second from bottom in the Premier League, emerged as the victor from a long and acrimonious battle with Tottenham Hotspur for the right to move in. At one point, Spurs had proposed knocking the stadium down, building a new ground designed for football in its place and funding a venue at Crystal Palace to comply with requirements for an athletics legacy from the London Games.

William Shirley, an analyst at Liberum Capital, said: "Every contract is helpful, but it's not groundbreaking."

He said with the government holding back on spending, Balfour Beatty either needed to gain lots more similar-sized projects or the government needs to "get the appropriate framework in place so that utilities are willing to invest". © 2014 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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