Around 700 employees at the social housing repairs firm Connaught have been made redundant, administrators KPMG confirmed today.
The cuts were announced shortly after construction group Morgan Sindall unveiled a £28 million deal to take on the "majority" of the collapsed firm's social housing contracts, saving some 2,500 jobs.
The jobs upheaval comes two days after the appointment of KPMG as administrators for the main company, and its subsidiaries Connaught Partnerships and Connaught Technical Solutions.
KPMG said the redundancies were made at Connaught Partnerships, the Leeds-based social housing arm with contracts across the UK, but could not give further details on the locations of affected staff.
The division employed 4,400 staff across the country, so the future for some 1,000 jobs still remains uncertain.
Earlier today Morgan Sindall said its affordable housing division, Lovell Partnerships, had acquired the bulk of Connaught Partnerships' contracts.
John Morgan, executive chairman of Morgan Sindall, said: "Our focus now will be to ensure a smooth handover of the contracts and to minimise disruption to essential maintenance services."
Staffordshire-based Lovell said its newly-acquired contracts would generate around £200 million in additional annual revenues.
The firm, which posted operating profits of £14.9 million in 2009, said the type of contracts it had taken on involved both response and planned maintenance work.
Mr Morgan said: "This is a step change for Lovell. The acquisition significantly increases the scope and scale of our planned and reactive maintenance activities and further develops our market leading position."
Lovell could not specify exactly how many contracts would be added to its books, but a spokesman today said it was "the bulk" of the social housing business.
The administration of Connaught's main division left around 280 contracts for councils and public sector bodies up in the air, and caused uncertainty for suppliers and contractors.
Connaught was thrown into turmoil after warning in June that Government spending cuts could blow a £200 million hole in revenues over this year and next.
Bosses at Connaught held crunch talks with its lenders, led by taxpayer-backed Royal Bank of Scotland, and other potential financiers in a bid to keep the company afloat.
But it told investors late on Tuesday it was left with no option other than to start the process of administration after failing to secure further financing.
Other regional bases affected by the decision included those in Glasgow, Bromsgrove, Crawley and Essex.
More than 4,500 staff work at its other subsidiaries that have not been placed in administration - Connaught Compliance and Connaught Environment, which employ 1,800 and 2,700 respectively.
KPMG said these businesses continue to trade as normal and possible buyers had shown interest.
Connaught, which started life in 1982 as a concrete repair specialist in Sidmouth, provides services to the environmental, social housing, public sector and compliance markets. The firm employed around 10,000 people across all its divisions, before today's movements.
Richard Heis, joint administrator at KPMG, said he "remained hopeful" that more staff would be transferred during the process, as the firm searched for buyers for Connaught's remaining contracts.