Training | 2010.03.25
2,000 jobs at risk as Jarvis collapses into administration
Rail maintenance contractor stops trading after workload plummets and lenders refuse to prop it up
The railway maintenance contractor Jarvis has collapsed into administration, putting around 2,000 jobs at risk, after its lenders refused to prop it up with more capital to keep it trading.
Jarvis, which is chaired by the former Conservative minister Steven Norris, said it had been hit by a "very considerable reduction in rail and plant work" after the government drastically cut spending. In an effort to reduce its dependence on its key client, Network Rail, Jarvis secured a £55m contract to upgrade Chiltern Railways\' lines in January and also won its first small signalling contract with London Underground recently.
Several waves of job cuts have halved the company\'s workforce from 4,000 this time last year .
Once one of the UK\'s largest construction companies, Jarvis said today it needed more capital from its lenders to enable it to win new work but they had decided to withdraw their support.
"Following negotiations with the company\'s secured lenders, it has today become clear that sufficient support will not be extended to the company to enable it to continue trading as a going concern," Jarvis said in a statement to the London Stock Exchange.
"As a consequence, the directors now have no option but to take steps (together with the company\'s secured lenders) to place the company, and certain of its subsidiaries, into administration, and to request that trading in its shares be suspended with immediate effect."
Jarvis is thought to have appointed Deloitte as administrators. Last month it warned of an operating loss of £5m for the year to March and said it had run up restructuring costs of £3m between October and February, and debts of £12.6m.
Jarvis never made good on its chairman\'s 2008 pledge that the company was "climbing the slope to full recovery". Only last month Norris, who stood as the Tory candidate for mayor of London in 2000 and 2004, declared: "We now have a strong bid pipeline with a significant proportion of work secured already for next year."
The company began to decline after admitting liability for the Potters Bar rail crash in 2002 in which seven people died. Jarvis was responsible for the stretch of track where a set of points broke, derailing the train.
Once valued at more than £1bn, the company was worth just over £20m when the shares were suspended.
David Hudson, head of corporate insolvency at Baker Tilly, said: "With the widely accepted view that public spending has to come down, people need to appreciate the inevitable knock-on effect of business failures, especially among businesses with a high dependency on public money.
"In Jarvis\' case, Network Rail\'s decision to cut its track renewal programme by 30% which, as for any organisation losing such an amount of work, led to great difficulty for the business. For businesses reliant on public spending, the recession was tough but the recovery will be even tougher."
For more information, please visit
http://www.guardian.co.uk/business/2010/[...]ail-maintenance-administration
