Babcock has cited the Office of Rail Regulation taking a reduced settlement of £28.5bn with Network Rail as the reason for cutting 25% of its rail construction and renewals workforce.
The reduced agreement for Control Period 4, stretching from 1 April 2009 to 31 March 2014, was lower than Babcock had planned for. The firm said it believes £22bn will be spent on renewals and upgrades, but Network Rail must find savings of 20% in project delivery costs.
Babcock’s measures include reducing its workforce in the 1,600-strong division by 25% during the second quarter of 2010 and restructuring its rail business, costing £4m. The firm is rationalising the number of operating locations in the North West of England.
Its rail division made a £1.2 million operating loss in 2009 and experienced a drop in revenue to £150.7m.
A company statement said: “This was mainly due to our withdrawal from the multi-disciplinary contract market but also due to the loss of the High Output Track Renewals contract that we had successfully operated for Network Rail for five years through our SB Rail joint venture with Swietelsky”