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Chairman and Chief Executive’s statement

This is Balfour Beatty's sixth Corporate Responsibility Report. The Group has a firm and explicit commitment to fulfilling its responsibilities to all of its stakeholders and reporting on its progress. Our major customers not only demand excellence in operational performance, technical skills and project management. They also want to be sure that their partners and suppliers meet or surpass their own high standards of responsible conduct. We set ourselves demanding targets in these areas and over the last six years have substantially reduced our accident frequency rate, greatly improved the management of our impacts on the environment and made significant strides in all aspects of good citizenship. We welcome the opportunity to differentiate ourselves in terms of safety, environmental management and wider social responsibility.

Our progress has been recognised in a number of ways. For example, we were again voted the "most admired" construction sector company in Management Today's 2006 annual survey and were rated sixth in the overall publicly quoted company league table. We also won the Quality in Construction Award for the best Corporate Responsibility programme in the industry.

Governance and Management

In 2006, we were able to continue the progress we have made over recent years. Our policies, internal controls and reporting processes and management systems were reviewed and confirmed. To our existing corporate principles and individual employee behaviour guidelines, we added codes of practice, which set key objectives and minimum standards for our operating companies' dealings with customers, employees, suppliers and the wider community. In 2007, we will begin a major training programme to embed these codes throughout the organisation.

Safety

Continuing management emphasis on our principal corporate responsibility - keeping our employees and the public safe - continued to bear fruit, with a further 24% reduction in our accident frequency rate despite rapidly increasing numbers of full-time employees and on-site subcontractors. We continue to focus on improving standards and to ensure all our operations match the highest standards which we achieve in the UK.

Health

The rigorous standards applied in the Group to safety management are increasingly also being applied to occupational health. Although the issues are less immediately tractable, we are making satisfactory progress in this regard.

Environment

We continue to work systematically to prevent negative environmental impact from our activities and to improve our environmental performance at every stage of our work. Annual measures of our energy usage, resource usage, waste generation and recycling, water consumption and our impact on environmentally sensitive areas are used to formulate policy and inform appropriate initiatives.

The Wider Community

Balfour Beatty's business is in the creation and care of social capital - schools, hospitals and transport systems, for example. In so doing, it makes a substantial contribution to society. In addition to this contribution, we believe that it is our responsibility to engage fully with the communities and individuals impacted by our project work and to add value to our work by delivering wider community benefits.

We have taken a number of initiatives to deliver on these objectives. Our sponsorship of the London Youth Games and our football coaching and competition programme in Stoke-on-Trent increase the opportunities available to young people in areas where our operating companies are active.

Our sponsorship of Building Better Lives, in conjunction with the Prince's Trust, brings an increasing number of disadvantaged young people training and employment opportunities in the construction industry. Through our leading involvement in Engineers Against Poverty and the Anti-Corruption Forum, we are helping to tackle two big issues in which our industry can make a positive impact. During our two-year association with Marie Curie Cancer Care, over £220,000 was raised by the company and its employees to support the work of the charity.

The Future

The Group will continue to be judged by its stakeholders not just on its profitability but also on how well it manages its affairs beyond financial performance. You can rest assured we will be working hard to maintain our forward momentum.

We continue to focus on improving standards and to ensure all our operations match the highest standards which we achieve in the UK.

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