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Rail revamp forces contractor shake up

FALLING ORDERS for major rail projects has forced Carillion to shut 22 depots and cut 300 staff from its rail division, the contractor said last week.

And Balfour Beatty revealed its recent acquisition of Birse was vital in helping it cope with Network Rail's strategy of breaking large projects into smaller packages (NCE 29 June).

Network Rail's spending on enhancement work has nearly halved over the past year, from £821M in 2004/5 to £473M 2005/6 fi although spending over the next year is expected to move back up to £700M.

Carillion has been forced into restructuring as it expects future major projects to be broken down into smaller packages of work, like the West Coast Main Line Trent Valley four tracking project.

Carillion finance director Chris Girling said his firm would reduce overheads and improve margins as interim results showed the firm's rail division was expecting a £50M fall in Network Rail revenues.

'We are dropping the number of people in rail by 300, but we have managed to reabsorb most of these into the business,' said Girling.

It is expected that there will be some redundancies.

Balfour Beatty's interim results also saw profits fall from £20M in the first half of 2005 to £11M in the first half of 2006.

Balfour Beatty Civil Engineering managing director Andrew McNaughton said the contractor's acquisition of Birse, with its skills on smaller projects, would help it win future Network Rail projects (see feature page p26) A Network Rail spokesman said: 'Network Rail's spending remains at historically high levels. It may be packaging work up differently in order to achieve effiencies and value for money and some contractors are better at responding to this than others.' He added: 'The work is there to be won, it just is a more competitive marketplace.' Carillion's troubled rail business has also seen a reshufe of its 2,500 staff in attempt win back the right to bid for Network Rail contracts following a recent ban in response to its safety record (NCE 24/31 August).

'We are changing people at all levels in rail to get different approaches and change the [health and safety] culture at the coal face,' said Girling.

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