Poor Jarvis is on a train to nowhere

From super-success to dire straits, the British engineering company which just couldn't avoid its fate. Mark Leftly reports

At the Windmill Inn, just outside the medieval walls of York, rail engineers drowned their sorrows with pints of Black Sheep and John Smiths Extra Smooth. Earlier that day, many of them had been made redundant from Jarvis, the York-based rail contractor that was once worth £1bn but is today in administration with little hope of survival.

The city's National Railway Museum will host a jobs fair next week to help the 1,100 people who were booted out on Wednesday find work. At the same time, administrator Deloitte will keep what little remains of the business going – primarily facilities management contracts that are legacies of Jarvis's foray into the Government's Private Finance Initiative (PFI) – until buyers can be found.

It is a shocking end to what was once a great success story of British business, driven by its champagne-swilling former chief executive, Paris Moayedi. That was the first phase of Jarvis's roller-coaster ride. The second was the survival campaign successfully waged by Steven Norris, the colourful former Conservative transport minister, in the wake of the Potters Bar rail disaster in 2002. And the third, final, stage has been its collapse, an almost Shakespearean feeling that outside forces had taken Jarvis's fate out of its own hands.

Part 1: Rise and fall

"Moayedi was a brilliant entrepreneur, but not a good businessman," smiles a former colleague.

The Iranian's brilliance was demonstrated when he bought a small construction firm in 1994 for just £3.6m. He moved Jarvis into track renewals and maintenance work, buying advanced equipment to ensure it won big contracts, and diversifying into PFI. Moayedi had noted that the new Labour government was obsessed with building hospitals and schools with private money, meaning that lucrative contracts were available if prices were pitched carefully.

Moayedi was a tough boss. "He wasn't a real shouter, but he could be cutting if someone did something wrong," says a former Jarvis employee. At one point, a senior executive suggested a plan to impress a client, which Moayedi believed looked cheap. "That is like feeding sausage to a lion that has just gorged on fillet steak," he snarled.

As the City was wowed, and expected ever greater things from Jarvis, so Moayedi and his management team felt forced to deliver. In 2000 and 2001 the group won 19 major PFI contracts: a sign that Moayedi the businessman was less than perfect.

Jarvis's bid teams were winning work by pitching at low margins, meaning that any cost increases, typical in construction, could not be absorbed later. "The PFI team was incentivised to get deals done," says a former adviser to the group. "They had to be seen to be winning work, so there were lower margins and greater risk,"

Worse was to follow. "The defining moment for Jarvis was Potters Bar, without a doubt," sighs a source close to the company. "And yet nobody can point to anything that the maintenance guys at Jarvis did wrong."

On 10 May 2002, seven people died when a train derailed on track maintained by Jarvis. The company was widely blamed, and though it later apologised on behalf of the entire industry, it has never been proven that the company was at fault. No matter, Jarvis's reputation was dirt and convincing local authorities to award it PFI contracts became next to impossible.

Part 2: Rising from the ashes

Jarvis was haemorrhaging cash, and executives' attempts to woo potentially friendly journalists and ministers were unsuccessful.

Moayedi moved from chief executive to chairman in 2003, a role for which someone who was so hands-on was patently unsuited. The new boss, Kevin Hyde, cruelly dubbed the "Fat Controller" by some in the company, made a terrible mistake that September.

A train was derailed at King's Cross station during the morning rush hour on a piece of track Jarvis had been repairing. Hyde decided to kill the story by quickly admitting Jarvis had made a signalling error. The trouble was that the cause had nothing to do with Jarvis.

Hyde's blunder, which infuriated Moayedi, entrenched Jarvis's reputation for ignoring health and safety regulations, even though in retrospect this seems to have been unfair.

Investors complained to a non-executive director, Steven Norris, that Moayedi had to go. In October 2003, he launched something of a coup, telling fellow non-executives over coffee that he would ask Moayedi to step down.

Moayedi left in November and was succeeded as chairman by Norris. Hyde was replaced by Alan Lovell, considered a turnaround expert from his days at construction group Costain and sports equipment group Dunlop Slazenger.

The duo instigated a £350m debt-for-equity swap with its creditors, as the interest repayments were crippling the company. They slimmed down the firm, stopped construction contracts and refocused on rail work.

Although there were subsequent difficulties, such as a profit warning in November 2007, the company kept its head down and was respectable again, without reaching the heights of the turn of the millennium.

Part 3: Doomed to failure

Job done, Lovell moved on and Norris plotted a profitable escape for the company's shareholders. Adviser Close Brothers sought a buyer, and by mid-2008 US manufacturer Caterpillar and a private-equity group were battling it out to take control.

Management felt that talks had reached a sufficient level of detail to announce the possibility of a sale to the stock exchange. But the collapse of Lehman Brothers in September 2008 sent a chill through the markets and Caterpillar put a global freeze on new acquisitions.

Any chance of a decent deal was ruined. The pity was that Jarvis could have been sold at a premium as it had been given plenty of work for the previous three years. Then Network Rail dropped its bombshell, slashing the volume of work it was giving to contractors by 30 per cent. Jarvis was forced to make 800 redundancies.

"I always look to Network Rail and its inability to manage a sensible stream of work – supply just fell off a cliff," says a former Jarvis consultant, angered that such simple renewal work was dished out inconsistently.

Jarvis had relied too heavily on one customer, Network Rail. The board had no more control over its client than it did over the economic woes that had ruined its sales plans.

The only bright spot was the £55m Evergreen contract it won in January from Chiltern Railway. But creditors were growing tired of cashflow problems. Norris and his team tried desperately to convince them to support the business until Evergreen revenues start coming through next month.

"If the banks continued to back us, the plan was to sell to a big civil engineer which wanted to get into the rail industry," explains a Jarvis source.

They failed, and Deloitte was called in last month. That decision has left the business virtually worthless, the only beneficiary Punch Taverns, the owner of the Windmill Inn.

PROMOTED VIDEO
News
video
Life and Style
tech
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
News
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
education
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform