‘I’m a realist, and I learnt that lesson quite some time ago’ | Q&A with Lee Powell

Place Yorkshire spoke to Lee Powell, the newly appointed managing director of Henry Boot Construction, to discuss his plans for the direction of the company and get his thoughts on industry trends, challenges, and future priorities.

I met with Powell at the HBC office in the heart of Sheffield, the company’s spiritual home and a stone’s throw from some of HBC’s city-shaping projects such as Pound’s Park, Kangaroo Works, Elshaw House, and Cambridge Street Collective.

The history and heritage of Henry Boot is something that quickly comes up in conversation when I ask Powell what made him take on the mantle of MD at the company, having stepped away from the chief executive role at GMI.

“There’s such a massive heritage. The history behind Henry Boot Construction, the group is 138 years old. You grow up with household names like Henry Boot Construction.

“GMI was fantastic. When I joined, we did £60m turnover, we peaked at £360m and it settled around the £250-300m mark. GMI has done its business improvements, it’s done its management changes, it’s done its digitisation.

“Henry Boot finds itself in a similar situation. So the challenge there is – not do what we did with GMI, because we don’t want to grow it as big as GMI – but develop the business, increase the client base, give a better offering to the marketplace, and grow the business.

“There’s an excitement to being involved with Henry Boot, being a part of growing it and establishing it to what it was previously, years ago.”

Henry Boot is synonymous with Yorkshire, and Sheffield in particular. Are there plans to expand beyond this region?

Let’s be honest, Henry Boot is quite parochial to South Yorkshire at the moment, albeit we do have jobs elsewhere. We want to spread our wings, but not too far. We’ve got an office in Dronfield, so push into the East Midlands, also cover South Yorkshire and the city of Sheffield, and then, in the force of time, get some presence in Leeds and then expand out and fill Yorkshire, and then into Teesside.

There’s a marketplace of about £3.8bn in construction. We only want a small slice of that. We want to be around £125m – roughly eight projects on site at one point in time, operating throughout the industrial and logistics sector, operating in the multiroom sector, so hotels, the PBSA, the BTR sectors.

The public sector is exciting and nearly 80% of the work that the business does at the moment is public sector, and that’s a solid baseline to have.

So, let’s balance the portfolio with more private sector work and grow the business to around £125m, so it’s not massive but is sizable, and really drive the customer service.

Let’s go back to being a customer-focused service provider: a contractor that massively cares about its clients. Giving a guarantee that the project will be delivered in a non-adversarial manner, top quality, high compliance, sustainable, and finishing on time without any litigation.

All of which sounds like a good plan for the long-term. What will your focus be in the short-term?

The short term is getting back into the I&L sector in in a big way. That market is still struggling a little bit because of the cost of borrowing and interest rates, but I think that’s going to come better in the next three to five years.

PBSA is another big one for us. We understand that marketplace, we understand the metrics and the dynamics of it. Multiroom is difficult to deliver, it is the hardest product to deliver, so you have to be cautious about it but deliver it very well.

And in terms of industrial, what are the biggest challenges in that sector?

With I&L it’s the yields. The exit yields for property deals and funding deals are too high, so that makes it too expensive to build. We’ve had hyperinflation and the cost of construction has ramped up over the last few years, the cost of borrowing has gone up, and therefore, it’s difficult to make the project stack up.

Without getting political, the current government’s having a little bit of a difficult time at the moment. Interest rates may or may not be reduced. The Bank of England may step in to reduce that, to get the economy moving, but that’s the main problem. From 2018-2021, the value of land was very high, so people were buying land to do I&L developments and paying at the top of the market. That land bank is still there and it’s on people’s books at a high level.

So when you’ve got a high cost of borrowing, high construction costs, and you paid a lot of money for land that is no longer worth as much as it was, that has been prohibitive to a lot of I&L. That’s the main barrier to entry, but it is easing and it is getting better.

In the marketplace itself, there’s been a change from the big box developments from 500,000-1m sq ft to mid-box, so 50,000-200,000 sq ft developments, which suits our business.

Are you optimistic, pessimistic, or neutral about the government’s plans for the construction sector?

I would always consider myself an optimist but actually I’m a realist, and I learnt that lesson quite some time ago.

By profession I’m a quantity surveyor, dealing with the contractual and commercial side of projects, and that tends to deal you a decent serving of realism and being cautious.

We’ve had Brexit, we’ve had the pandemic, we’ve had hyperinflation, we’ve had the Truss administration. Now, people might not like the fact that the economy is not growing as strongly as we like, or at all, but at least we’re stable and what we need is stability.

So it’s better, it’s a better period now than we’ve had for the last five or six years. That’s for certain.

Is more resi development something that’s on your radar?

Residentials are a big thing. You’ve heard the government speak about building homes and everybody automatically assumes that they’re low-rise, or detached, semi-detached, or townhouses – but homes come in the form of apartment blocks, BTR or buy to sell.  There is a big market there. We’d like to consolidate ourselves into that and start to grow in that sector as well. We’ve just finished the Cocoa Works in York, which was a £55m construction scheme.

In terms of industry trends, what have been the biggest changes that you’ve noticed throughout your time in the industry?

Two things, really. First you’ve got compliance and regulation, which has become a lot more robust and a lot more stringent. And it’s needed to be. I’m going back some time now, but the BA regulations in 1984 started to change things. There was a night and day change with other construction acts in the late 90s, and in more recent times the Building Safety Act.

The Building Safety Act on BTR and multiroom – getting a full golden thread document at the end of the project so that you can detail exactly where every product comes from and how it’s being built and installed is not what we’re used to, but I welcome it.

Rather than run away from compliance and regulation, you should embrace it and set your business up to deal with it. You’ve got a better client offering if you actually embrace it rather than trying a dodge it. And there are some companies that try and run away from it.

The other thing is the skill shortage and we’ve known about this since I was at college. There’s a skill shortage and the attitude towards working is different, the whole world has changed. There is more of a work/life balance, and rightfully so. The industry was very much high pressure, high stakes. It was a lifestyle, it wasn’t just a profession or a career. Unfortunately, we have to build buildings in the rain and the wind and the elements and that creates delays. Therefore, it’s not unusual to have a big bugle call at the end to get the job done, and people would work around the clock to get the projects finished. Since the pandemic, that’s changed massively.

Do you think the challenges faced by the construction industry in the north differ from the rest of the country, and if so, how?

There is a North-South divide. The Northern Powerhouse has never really got on its feet – it’s a nice concept, but the North and Midland cities and marketplaces have never really conjoined to take on the South and the South East. There’s a lot more money in the South East. Inside of the M25 doesn’t really suffer recessions and we do suffer that.

Another thing is in the Midlands and certainly in the North of England, a lot of the land is family-owned land. There’s a lot of family-owned wealth and land down in the south too, but it’s more institutional with a lot of it funded by finance houses and the like. Those institutions accept the market conditions a lot more than the family owners. It’s a lot more institutional, its balance sheet money, and they adapt to the market place much quicker.

And finally, do you have any predictions for future trends and things that will come to prominence in the industry?

Artificial intelligence, connectivity, the digital connectivity of buildings. Everything is becoming more digital, green, less carbon, so the environmental aspects in the building are being considered much more.

And the space inside – you’ll see office buildings in town centres are now reinventing themselves. It’s no longer retail and office space where you’ve got 10,000 sq ft office plates that are just full of desks. The commercial office space sector is my personal favourite. You have to have things like collaborative spaces to promote people coming back to offices, so we are we are seeing that social element to it as well. We are seeing that in terms of trends.

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