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Transport spending cuts to hit Jacobs

Public spending cuts will severely hit global consultant Jacobs’ UK infrastructure business, the company warned last week.

Chief executive Craig Martin told US analysts that cuts in the Comprehensive Spending Review would hit Jacobs’ highways business hard and leave its UK infrastructure business struggling to make a profit.

“The Comprehensive Spending Review overall wasn’t as bad as feared but it was really tough on our highways business,” said Martin. “It’s going to struggle, which is why the UK is at best a mild plus, and we are at best going to struggle to break even.”

The spending review settlement means the Department for Transport must cut spending by 15% over the next four years. At least £2.3bn of major projects have already been shelved by the Highways Agency as a result (NCE 4 October).

Martin was speaking to analysts after the firm revealed a big drop in earnings for the financial year ended 1 October.

Pretax profits for the year were £245M, down almost £150M on the £391M it earned in 2008/09. Turnover was down from £7.2bn to £6.2bn.

Chief financial officer John Prosser said the firm had been affected by the global recession.

He added that the firm had a £5.1bn order book, £4.8bn of which is in professional services.

In the UK, Martin said its water business would be vital to make up for the shortfall in highways revenues. “We are really excited by the AMP5 programme,” he said.

“That represents a strength that will offset the weakness in highways.”

But he stressed that costs would be tightly controlled.

“Our ability to manage costs and be a low cost producer is going to be big for us,” he said.

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