黑洞社区

There isn鈥檛 enough work to go round in the North-east, but do the big boys have the nerve to stick it out? That鈥檚 the question 拢40m-turnover Newcastle-based contractor Surgo is asking itself.

Because things are getting vicious. The region, described as 鈥渁 goldfish bowl鈥� by footballer Jermaine Jenas, is now more like a piranha tank for contractors.

Firms on Tyneside are bidding with infinitesimal margins and on a recent 拢10m university project, the winner is said to have gone in 拢500,000 under its nearest rival.

鈥淲e鈥檝e priced at 1% or 2% margins and been slaughtered in the tender process,鈥� says Jeff Alexander, Surgo鈥檚 procurement director. 鈥淭he nationals are even starting to look at sub-拢5尘 jobs.

鈥淲e wonder how they鈥檙e maintaining their local presence. The likes of Laing O鈥橰ourke, Bam and Balfour Beatty relied on the big jobs. Laing O鈥橰ourke has picked up a few bits and pieces, but if other nationals are picking up anything big they鈥檙e keeping quiet about it.鈥�

Surgo is a local contractor, formed by a management buyout of Newcastle firm Bowey鈥檚 construction division in 2002. Whereas competitors have sold out to nationals - Kendall Cross was bought by Galliford Try and Gordon Durham was bought by Vinci - Surgo has resisted, despite an offer from one unnamed national.

Alexander, a 50-year-old local, started working at Bowey in 1989. He moved to Surgo with the rest of the construction team and the plan was to increase turnover to 拢60m. It nearly got there - in 2008 it had a peak turnover of 拢55m and was winning plenty of profitable education projects, including four academies.

It also won the 拢8.5m Whitley Bay Playhouse and some university work, as well as a Decent Homes contract for refurbishment on thousands of homes in North Tyneside. Then came the recession, and the cessation of schools capital spending. Having made just four redundancies up to now, the firm finds itself battling for the small jobs with everybody else.

鈥淭he last academy we did was opened in 2009,鈥� says Alexander. 鈥淲e鈥檇 love another one. But frameworks squeezed out the medium-sized contractors, so that work was disappearing anyway.鈥�

But he hopes the firm鈥檚 size could help now the government has taken the axe to the 拢55bn 黑洞社区 Schools for the Future scheme. 鈥淚 think we will probably pick up more schools, perversely, because regional procurement is advantageous to us and hopefully the bidding costs won鈥檛 be so astronomical.鈥�

Over the next year Alexander expects turnover at Surgo to drop slightly to 拢40m, with pre-tax profit also falling, to about 拢4m. The firm has no shareholders to please and with its housing work, potential primary schools and refurbishment work on five schools, it thinks it has enough to keep going.

鈥淚t鈥檚 just that the value of individual projects is much smaller now,鈥� Alexander says. 鈥淚f a job is over 拢5尘 it feels like a big one. So I think 2011 is going to be tough and there will be more casualties on the way.

鈥淚 was just down in London and people were saying things were picking up. It鈥檚 just going to take a while to make its way up here.鈥�

Surgo in numbers*