Jarvis the latest victim of spending slowdown

The York-based company has been hammered by Network Rail slashing its workload, and yesterday was forced to call in administrators.

Jarvis said after "very considerable reductions" in work, its banks pulled the plug on its working capital facility, leaving about 2,200 jobs hanging in the balance.

Jarvis was reliant on Network Rail for about 90 per cent of its rail revenues, has already been forced to cut hundreds of jobs after the state-backed body decided to reduce track renewal work by around 30 per cent.

Last month it warned it was likely to report a 5m annual operating loss.

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

The company's shares were suspended at 9.4p, giving it a market value of 20m.

At its peak, it had a market capitalisation of more than 1bn and was the UK's biggest construction company. Administrators Deloitte, led by Neville Khan, are expected to be appointed imminently.

Sources said the company's collapse was surprising given progress made by its new management in diversifying its client base.

Just last month chairman and former Tory MP Steven Norris said this strategy was "already bearing fruit", after Jarvis announced a contract worth 55m with Chiltern Railways.

"It was well known that Jarvis was exposed to one particular customer, but it was clear that they were making good progress and diversifying," said an industry source.

It is understood Jarvis had been trying to extend and enlarge a 50m working capital facility with its secured lenders, Bank of Ireland and Bank of America, which was due to expire in January 2011.

The company's debt in February was down to 12.6m from 22.3m in October, due to lower working capital requirements. But Jarvis wanted to increase the facility to finance new work, including the Chiltern deal.

Jarvis's assets, valued by analysts at between 30m and 50m, formed the collateral for the loan.

Bank of Ireland was one of the lenders behind collapsed retail chain Woolworths.

Both banks last night declined to comment.

Jarvis is one of only four track renewals contractors used by Network Rail.

It is thought the group's track renewal equipment will be highly prized among rivals Amey, Babcock and Balfour Beatty.

Suitors have repeatedly circled the company, but are believed to have been deterred by its pension deficit, which stood at almost 36m a year ago.

Network Rail said it had put in place contingency plans to ensure work which was due to be handled by Jarvis can 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.

"We will work closely with the administrators to keep our investment programme moving forward and have put contingency plans in place in relation to any work that can't be taken forward by Jarvis in the weeks ahead."

A JOURNEY with twists and turns

1846 – Jarvis was founded in London as a building company.

1994 – Paris Moayedi takes over Jarvis, turning it from a tiny, loss-making construction firm into an infrastructure company focused heavily on PFI.

1995 – Jarvis returns to profitability, posting 500,000 in profits on more than 76m in sales.

1996 – Jarvis buys rail maintenance business Northern Infrastructure Maintenance Company for 9m.

1997 – It buys Fastline, a rail freight business, and Relayfast, a rail engineering business.

1998 – Jarvis buys road and airport maintenance firm Streamline

Holdings for nearly 184m.

2002 – Seven people are killed when a train derails at Potters Bar. Jarvis had inspected the tracks before the incident.

2004 – Jarvis admits liability for the derailment and sets aside 3m to pay claims.

2005 – Under chief executive Alan Lovell, the company is restructured and a debt-for-equity swap clears its debt. The company moves its headquarters to York.

January 2009 – Network Rail reveals it is delaying a 4bn portion of its track renewal programme.

March 2009 – Jarvis closes its rail freight business, blaming the recession.

September 2009 – Chief executive Richard Entwistle leaves the business and is replaced by Stuart Laird.

February 2010 – Jarvis issues a profits warning.

March 2010 – Jarvis is forced into administration, blaming lack of support from its banks and Network Rail.