Skanska announces move into UK housebuilding

Published 10th Dec 2010

Swedish construction group Skanska sees opportunity in 'huge gap between supply and demand' in UK housing market


The builder of London's Gherkin and Heron Tower skyscrapers became the newest name in UK housebuilding today as it sought to take advantage of opportunities thrown up by the credit crunch.

Swedish construction group Skanska, one of the biggest building contractors in the world, announced today that it was setting up a UK residential arm.

"There's a huge gap between supply and demand [of homes in Britain]," said Magnus Andersson, who is heading the new venture. He added that low land values and the ability to recruit good staff were creating a golden opportunity.

Skanska Residential Development, as the new company will be known, will be kept apart from Skanska's UK contracting business, but the construction arm will build all the new homes.

The company did not give away too much about its ambitions, but did say it did not want to become too big. "We are going to focus on outer London, and on places within commuter distance of London. We are not looking at creating a volume housebuilder, more a small to medium-sized business," Andersson said. He would not give figures on the size of the investment or the number of homes Skanska hoped to build, but given the group's strong balance sheet, expectations will be high.

Skanska bought into the UK construction market when it acquired what used to be Trafalgar House, which until the late 1990s was a big name in UK contracting. Skanska bought the company from Kvaerner in 2000 and is now the ninth-largest contractor in the UK, turning over £1.5bn. The group as a whole turns over 137bn kronor (£12.5bn).

But housebuilding is a very different business from contracting. Only a few UK contractors also do housebuilding, and housebuilders take a risk on land values in a way that contractors do not.

Robin Hardy, a housebuilding analyst at Peel Hunt, was sceptical today about the Swedish construction group's chances: "If you don't know the planning system, if you don't have a design and development record, or know the planning authorities and the subcontractors, it's difficult."

Skanska has experience in housebuilding elsewhere in the world. Before the credit crunch, it was building 4,000 homes a year in the Nordic region. It has recently been dipping a toe into UK social housing with its "Modernahus" concept, a style of housebuilding that stresses green credentials and pre-fabrication. Andersson said that the new UK venture would sell itself as a new form of greener living and would also be focussed on "placemaking" – building schools and infrastructure alongside housing to create communities.

It aims to start building its first homes next year and is close to signing its first deals to buy land. Skanska is hoping that problems of mortgage availability, which have hampered housebuilders, will have resolved themselves when the new homes come to market in 2012 and 2013. The new business currently has only 10 employees, but Andersson said it was "recruiting heavily".

Source: ' Guardian '

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