Babcock to shed 450 jobs in Scotland: Government policy blamed for loss of power station construction work

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The Independent Online
BABCOCK International, which builds power stations and manages the government shipyard at Rosyth, is to cut 450 jobs at its Renfrew manufacturing site. The losses, more than a quarter of the plant's workforce, represent the latest blow to a region of Scotland hard hit by unemployment.

The company, which is chaired by Lord King, put the blame on government policy for the coal industry and the so-called 'dash for gas', which had in effect halted construction of the coal-fired power stations on which Babcock had been reliant.

Erik Porter, finance director, said the job losses were part of a pounds 13m restructuring, which would also include 100 job losses at Babcock's South African subsidiary. He said increasing dependence on exports had reduced demand for home-based manufacturing and he expected the jobs to go within the next two months.

The company said its confidence a year ago that the recession was coming to an end had been misplaced. Mr Porter admitted to 'a mixture of wishful thinking and not reading the signs right'.

Pre-tax profits in the year to March collapsed from pounds 56m to pounds 21m, after the costs of the reorganisation were taken as an exceptional item. The worse-than-expected performance included a pounds 6.2m provision to cover cost overruns on a pounds 30m contract to build a boiler for PowerGen.

The company's energy activities suffered from delays and postponements of orders at the last minute. Despite that the division's order book ended the year at pounds 317m, a four-year high, including new contracts in Greece and Hong Kong. For the group as a whole, orders stood at pounds 730m, a 33 per cent improvement on 12 months previously.

Those orders came too late to prevent turnover falling during the year, from pounds 830m to pounds 748m. Earnings per share were hit by a doubling of the tax charge to more than 50 per cent, slumping from 8.2p to 1.7p. Following a cut at the interim stage, the final dividend was reduced from 1.9p to 1.1p for a total of 2.1p, down a third.

At the Rosyth yard, where Babcock has a management contract until 1995, capacity had been reduced by 10 per cent to reflect a shortfall in expected work from the Ministry of Defence. A decision on whether Rosyth or Devonport will win the Trident submarine refit is expected soon.

Away from energy Babcock's other divisions held up better. Commercial work, including refurbishment contracts for London Transport, had increased and the materials handling division, which makes production equipment, had a good year.

Mr Porter said that a decision would be made before the annual meeting in July on a replacement for Oliver Whitehead, who resigned as chief executive in April after rumoured boardroom disagreements.

Babcock's shares, which have halved in value over the past 12 months, ended unchanged at 34.5p.

(Photograph omitted)