Message from the Chairman

The Board is proposing a final dividend of 7.7p per ordinary share, making a total dividend of 12.8p for the year, an increase of 11%.

Over time, we aim to grow the dividend broadly in line with our earnings, taking into account the investment needs of the business.

Our achievements reflect the high quality of the 40,000 people who work for Balfour Beatty worldwide. Recruiting the best people, developing their potential and rewarding performance is key to our future success.

We have made a number of significant executive appointments to provide the platform for continuing successful growth:

Anthony Rabin became Deputy Chief Executive in March 2008, having held the position of Finance Director since 2002. He is responsible for the management and development of our infrastructure investment businesses.

Duncan Magrath succeeded Anthony as Finance Director, having been Deputy Finance Director since 2006.

Andrew McNaughton was appointed Chief Operating Officer, with effect from 1 January 2009, reporting to Ian Tyler and taking over responsibility for all our construction, engineering and rail activities outside the US.

Within our US construction and engineering business, Jim Moynihan, who has responsibility for Heery, Balfour Beatty Infrastructure and Balfour Beatty Rail, and Robert Van Cleave, chairman and CEO of Balfour Beatty Construction US, report to Ian Tyler. Bruce Robinson, president and CEO of Balfour Beatty Communities, reports to Anthony Rabin.

We also made two non-executive appointments:

I am pleased to welcome Hubertus Krossa to the Board following his appointment as a non-executive Director in September 2008. His extensive international operating experience, combined with his knowledge of the UK business environment, will be of great value to us.

I am also pleased to welcome Graham Roberts to the Board as a non-executive Director from 1 January 2009. He will become chairman of the Audit Committee from 5 March 2009. Graham is finance director of The British Land Company PLC and brings valuable financial and commercial experience to the Board.

The Group’s Accident Frequency Rate (AFR) reduced a further 5% in 2008 to 0.20, continuing the positive trend of recent years.

In 2008, we launched a new safety commitment across all our businesses called Zero Harm. The goal is to have no seriously disabling injuries and no long-term harm to health, while aiming for zero AFR across the Group by 2012.

We are committed to the principles of good governance, aim to carry out our business with integrity and aspire to the highest standards. Our key values of integrity, teamwork, excellence and respect are being embedded throughout the Group, an essential pre-requisite in creating long-term value in today’s environment.

In January 1909, Balfour Beatty was founded by George Balfour, a Scots mechanical engineer, and Andrew Beatty, an English chartered accountant. We still share their commitment to engineering skills and delivering solutions to our customers’ requirements today.

A hundred years later, almost to the day, in January 2009, Balfour Beatty entered the FTSE 100 for the first time.

To commemorate our centenary, we announced a new charity programme called Building Better Futures. Working in partnership with The Prince's Trust and Action for Children, with the support of our people, the aim is to fund at least 100 community improvement projects through the year.

A key theme of our corporate responsibility programme is enhancing the lives of young people. We were delighted that 2008 was our first year as title sponsor of the Balfour Beatty London Youth Games. The Games, which we are sponsoring up to 2013, encourage children in the 32 London boroughs and the City of London to participate in sport.

Balfour Beatty is a world-class business, well-positioned in major markets which offer the prospect of long-term growth.

The breadth of our capabilities, the successful delivery of our growth strategy – including through integrated acquisitions – and the strength of our balance sheet mean that the Group is well-placed for the future.

We have benefited from continued growth in infrastructure expenditure in 2008 and had an order book of £12.8bn at the end of the year.

Crossrail, the new rail route planned through London; the nuclear new-build programme in the UK; and the medium-term outlook for rail, present us with significant opportunities.

Despite significant economic uncertainty, the Board remains committed to the ongoing delivery of the reliable, responsible growth that shareholders have enjoyed in recent years.