Builders boosted by 'very, very busy' London market

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Competition is squeezing margins for construction firm Kier, but chief executive Paul Sheffield said a "very, very busy" London market is the consolation as the company chases another £500 million in work on the cross-London rail link this year.

Steve Morgan, chairman of house-builder Redrow, is also pitching into the London residential market, snapping up six sites with a development value of £300 million. The builder has earmarked schemes in Kingston-on-Thames, Ealing, Aldgate and Wapping, as well as luxury flats at Connaught Place, despite "fragile" industry conditions elsewhere.

Morgan, who is targeting the "prime but not super prime market" in London, oversaw an 80% rise in pre-tax profits to £15.3 million for the six months to December, and echoed recent upbeat sentiment on a recovering housing market. Morgan has seen 6,000 applications from would-be first-time buyers ahead of the Government's NewBuy mortgage guarantee scheme, which comes in next month to hopefully unlock lending markets for those with small deposits.

Kier's Sheffield, who welcomes mayor Boris Johnston to Paddington next month to switch on one of the huge tunnel boring machines to be used on Crossrail, said: "London is much stronger than the rest of the country."

Kier won the £200 million contract for Farringdon's Crossrail station last year in a joint venture with BAM Nuttall and Spain's Ferrovial.

The firm is also completing the £30 million remodelling of King's Cross station's roof. "This hadn't been done since the 1920s and it still had bomb damage from the war," he adds.

Kier pushed up interim profits 9% to £34 million from £31.3 million last year, but expects the squeeze on its margins to continue for the "next couple of years at least".

Meanwhile the UK's biggest shopping centre owner, Capital Shopping Centres, is advancing plans for a major £180 million extension of its Lakeside shopping centre, where a flagship Topshop store has just opened and Forever 21 will launch its fourth UK store at the end of the year. CSC pushed up underlying earnings 43% to £139 million last year, helped by the £1.6 billion acquisition of Manchester's Trafford Centre.