Jarvis collapses into administration with 2,000 jobs at risk

The company was forced to call in administrators and request that trading in its shares was suspended, following a plunge in rail and plant work.

The York-based group, which has operations throughout the UK and is chaired by former Conservative minister Steven Norris, said it had suffered "very considerable reductions" in business.

David Hudson, head of corporate insolvency at Baker Tilly, said: "With the widely accepted view that public spending has to come down, people need to appreciate the inevitable knock-on effect of business failures, especially among businesses with a high dependency on public money.

"In Jarvis' case, Network Rail's decision to cut its track renewal programme by 30 per cent which – as for any organisation losing such an amount of work – led to great difficulty for the business.

"For businesses reliant on public spending, the recession was tough, but the recovery will be even tougher," he warned.

Jarvis – once the UK's biggest construction company – had been seeking to reduce its dependency on Network Rail and recently landed a 55 million "Evergreen 3" deal from Chiltern Railways for renewal works to the line serving Oxfordshire and the Midlands.

It said yesterday the win had been "encouraging", but that directors had been left with "no option" other than administration following unsuccessful negotiations with its lenders.

"Following negotiations with the company's secured lenders, it has today become clear that sufficient support will not be extended to the company to enable it to continue trading as a going concern," Jarvis said in a statement.

The collapse came a month after it warned of heavy losses amid spending delays at Network Rail. Half-year revenues plunged 43.5 per cent to 114.7m and the group pencilled in a 5m operating loss for the full-year, saying that 3m in restructuring costs was likely to mean an even deeper slide into the red.

The news capped a chequered history at the group. It came close to collapse in 2004 after racking up huge debts on overambitious bids for private finance initiative contracts, which forced it to sell off a raft of businesses under a sweeping overhaul.

Network Rail said it had put in place contingency plans to ensure that work due to be carried out by Jarvis would continue.

Simon Kirby, director of investment projects at Network Rail, said: "It's never easy to see one of our suppliers cease trading, especially when there is plenty of work available and investment in the railway is at historically high levels."

Shares in Jarvis closed at 9.45p on Wednesday, down from a peak of 23.75p on 10 September.