Jarvis hit by loss of schools contract

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The Independent Online

Jarvis, the troubled engineering contracting business, suffered another major setback yesterday when one council dropped the group from a £174m schools project and another said it was seeking assurances that it could continue with its £115m contract.

Jarvis, the troubled engineering contracting business, suffered another major setback yesterday when one council dropped the group from a £174m schools project and another said it was seeking assurances that it could continue with its £115m contract.

A spokesman for Manchester City Council, which chose Jarvis for two new schools in a deal worth £115m, said last night: "We are seeking confirmation from the directors of Jarvis that they are in a position to continue negotiations on our schools project."

Earlier, Fife council said it was abandoning Jarvis for its £174m contract to build 10 schools for the area due to concerns over the group's deteriorating financial condition. Jarvis shares fell from 39.5p to 37.75p.

The Scottish council was due to finalise the contract at the end of July, but during the month the threat of bankruptcy began to loom over the company. The group, which was hit by a number of derailments - including the Potters Bar crash - in its track maintenance division, reported a loss of £244m. It was forced to secure emergency short-term funding of £25m.

Morag Wallace, the partnerships manager at Fife council, said yesterday: "When the financial position of Jarvis changed in July, it became a feature of our discussions. We couldn't finalise the contract as the situation of Jarvis had changed so materially. It is clearly going through a major restructuring that will take some time to sort out. We needed a partner where we could have certainty that they would deliver over the 25-year lifespan of the contract."

Jarvis had beaten off competition from Balfour Beatty and Miller Construction, an Edinburgh-based company, for the contract. Fife will now go back to Balfour and Miller and re-offer the contract using Jarvis's designs.

Jarvis has a number of other schools projects, such as one with Norfolk County Council to refurbish 37 schools. The project has already hit delays and the council said yesterday it was still waiting to hear whether Jarvis had secured a building contractor to begin work.

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