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Carillion and Grant Rail lose Network Rail renewal contracts

Contractors Carillion and Grant Rail today lost their lucrative £100M per year contracts with Network Rail when it cut the number of firms carrying out track renewals from six to four.

The remaining contractors - Amey SECO (joint venture), Balfour Beatty, First Engineering and Jarvis - will see Carillion and Grant Rail's renewal work carved up and gradually passed to them over the next few months until hand-over completion in February 2008.

Carillion and Grant Rail employees will also be transferred following consultation with trade unions. Approximately 16 major depots are likely to change hands.

Network Rail made the changes in order to improve its ability to plan and coordinate renewals work, following a six month assessment of the existing renewals regime.

The rail operator predicts that the cull of contractors will deliver 23% efficiency savings over five years, compared to a forecast 18% using six firms for renewals.

Network Rail infrastructure director Peter Henderson said: “By making these changes, Network Rail aims to achieve significant improvements in the delivery of our track renewals programme. By aligning plain-line track renewals and switchings and crossings renewals, and by working closely with our suppliers, we can deliver much improved quality, safety and efficiency.”

The new track renewal contracts are estimated to be worth between £80M and £100M per to each of the four remaining contractors and will last until 2009.

Speaking ahead of the announcement last week, Carillion financial director Richard Adam told NCE that the Network Rail renewals contract was worth approximately £70M to the contractor. Carillion's rail business is currently worth £300M annually, but the firm's directors do not regard it as a growth area for the group.

In a statement released today Carillion said Network Rail's decision would have "no material impact on Carillion's earnings in 2007 and beyond".

Grant Rail was unavailable for comment.

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