Balfour Beatty deal to plug hole in pensions

Nov 27 2010 by Iain Laing, The Journal

BUILDING giant Balfour Beatty has said it has agreed a deal to plug a £375m hole in its pension fund.

The group has reached an eight-year funding agreement with trustees of the pension scheme to pay a one-off £40m sum and also to double its annual deficit contributions to £48m.

Balfour has more than 40,000 members in its defined benefit pension scheme, which closed to new members in 2007.

The group had agreed in 2008 to make payments into the scheme of £24m a year, but the funding gap has soared in recent years - from around £114m at the time of the last triennial review in 2007.

Balfour said it had already increased the annual contributions to £36m since April in anticipation of a greater funding need after the latest scheme valuation.

Its new agreement will also see contributions rise by inflation-linked increases every April.

Mark Howson, analyst at Royal Bank of Scotland, said the contributions were unlikely to impact profit forecasts for Balfour, given that it had already increased annual payments to £36m.

He added: “We remain buyers of Balfour Beatty, with our belief that the share price rating very much overplays the effects of the Comprehensive Spending Review on the business.”

The pension news comes after Balfour recently announced its subsidiary Mansell Construction services was buying Rok’s social housing arm in the south west and north west out of administration. Around 380 Rok employees will be transferred as part of the deal.

Last month Balfour said that it plans to create more than 200 jobs in the North East when it opens up a regional office on Tyneside.

The company wants to open a customer support centre which will bring together some of its nationwide accounting and payroll functions in one office. Balfour has taken lease on a 41,000 sq ft office at the Quorum Business Park, North Tyneside.

It will initially start with 200 staff, with the office able to accommodate up to 400, and Balfour saying it expects to create additional jobs within three years.

The firms’s Northern division has been one of its strongest and was also one of the major winners of large council contracts.

These include a £63m Light It project to replace 80% of South Tyneside’s street lighting by 2011 and a £120m school building programme.