Ray O’Rourke’s big bet lies sprawled between hedgerows, fields and a railway line in the Nottinghamshire countryside.
From this vast, grey shed on the site of a former colliery at Steetley, near Worksop, Britain’s biggest privately owned construction company is trying to overturn centuries of building industry tradition.
The factory is Laing O’Rourke’s gamble on the future: that instead of building from scratch on confined sites, anything from skyscrapers to houses will be prefabricated off-site and bolted together as modules. O’Rourke believes the concrete slabs churned out by the Steetley factory will slash time, cost and labour, and revolutionise the trade. Opened in 2010, it produces vast slabs at the push of a button with the help of robots that follow the car industry’s lean manufacturing processes.
O’Rourke, the former labourer from Co Mayo who famously bought the building arm of the much bigger John Laing for just £1 in 2001, is evangelical about the method. His company transported vast chunks of concrete to the “Cheesegrater” skyscraper in the City, and uses it on projects across the UK.
Such is O’Rourke’s enthusiasm for the design for manufacture and assembly (DfMA) concept that he reportedly intends to use it on his Essex mansion. The builder, who according to The Sunday Times Rich List has a £330m fortune, plans to knock down his multimillion-pound mock Tudor home in the village of Fryerning and replace it with one built using concrete panels transported from Steetley.
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Last May, as David Cameron was celebrating his election victory, O’Rourke doubled his bet. The Irishman figured the Conservative win would mean a significant expansion in housebuilding and infrastructure, and signed off investment in another factory at Steetley, this time making modules for houses. He has staked £125m so far, and that figure is set to soar.
The gamble has put Laing O’Rourke under huge pressure. Its European operations lost £57.5m in the year to the end of last March, as a “perfect storm” of rising labour and materials costs combined with its investment in prefabrication. The company blamed contracts from 2013, which were redesigned to showcase the modular techniques and signed in a “particularly aggressive price-driven market”, for £61.2m of exceptional costs. Industry sources point to two problem contracts that have cost it dear — Alder Hey children’s hospital in Liverpool and a 22-storey hospital in Montreal.
Only £91.7m of profits from its Australian arm prevented the group, which had turnover of £3.9bn, from swinging to a loss for 2014-15. In January, Laing quietly announced it was selling the Australian business, which accounts for almost 40% of its turnover. Last month it said it was axing 200 back- office jobs in the UK, from a workforce of 15,000.
Industry executives say all this points to a severe cash squeeze: O’Rourke would not break up the empire he founded with his brother, Des, in 1978 unless cash was tight. Reports say its subcontractors have struggled to get credit insurance. Sources close to the company insist, however, that the Australian exit is a strategic move, and proceeds are likely to be pumped into more expansion of the modular business. “Ray’s getting older and they want to focus on the UK,” said one.
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It is, however, selling at a terrible time: the commodities crash has derailed the Australian construction market. An industry executive said Australian contracts that would have been “cost-plus” a couple of years ago were now fixed-price — ensuring the builder takes the risk on overruns. That is likely to mean the A$1bn (£520m) price tag on the business is optimistic.
Some in the industry say O’Rourke’s obsession with modular is risky. With so much invested in the method, he is determined to push as much work through the factory as possible — regardless of whether it suits a project. “Ray is forcing it on buildings that are not designed for it,” said an industry source. Others, however, believe O’Rourke is a visionary.
The Kent-based company, founded from a laundry room alongside the family home, has worked on high- profile projects including Heathrow’s Terminal 5 and skyscrapers at Canary Wharf. It oversaw construction of the 2012 Olympics venues.
“He’s right to focus on prefabrication,” said an infrastructure executive. “It’s the future. His factory is incredible.” Insurer Legal & General believes this too: last month it revealed plans to open what it says will be the world’s biggest modular homes factory, near Leeds, capable of building everything from terraced homes to high-rise flats.
The company said: “Laing O’Rourke manages its business for the long term and the group continues to enjoy the support of all its stakeholders and supply chain partners. We have a unique, diverse and well-invested business model and are focusing on streamlining our organisation to capture the efficiencies and cost benefits that will flow from the current investments in world-class talent, engineering excellence and advanced manufacturing.”
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Yet the boss, who refused to be interviewed for this article, must handle all this largely on his own. O’Rourke has suffered a series of blows over the past year, including his own heart surgery, family bereavement and the departure of his respected chief executive, Anna Stewart, because of illness. At 69, he finds himself running the day-to-day operations once again.
Succession has always been a problem for O’Rourke. People who have worked with him say he struggles to let go. Several senior managers have left. His son, Cathal, 38, runs the Australian business but is not keen to return to Britain — and is not seen as ready to take the helm.
All of this points to an uncertain future. Some in the industry believe O’Rourke is gearing up for an inevitable sale of some of the UK company.
Yet others say he is as invigorated about the business as ever — and determined to prove modular building is the future. Ray O’Rourke is not ready to step aside just yet.