Payment blow to workers of collapsed Jarvis

The York-based group was plunged into administration in March after its lenders pulled the plug on the business following Network Rail's decision to shrink its workload.

Now a report by administrators Deloitte says preferential and unsecured creditors of two large Jarvis subsidiaries, rail and Fastline plant hire, are unlikely to receive any of the money they are owed.

About 1,160 Jarvis staff were made redundant at the end of March, but will not receive the 28.1m in wages, holiday pay and other benefits they are owed.

"They have lost everything," said RMT North East regional organiser Stan Herschel. "It's absolutely scandalous."

Jarvis's secured lenders, Bank of Ireland subsidiary Burdale Financial Services and Bank of America, were owed 17.1m and have first call on the group's assets.

York Central MP Hugh Bayley said the Don Valley MP Caroline Flint recently urged Business Secretary Vince Cable to consider a change in the law to put staff on a level with bank creditors.

"It's a desperately bad situation for the workforce," said Mr

Bayley. "These men and women have been left without a job and without their past wages and cannot claim severance pay.

"I'm sad that the way the law stands the banks get some money back but the workforce, who have invested their lives in the business, get nothing."

According to Deloitte, a state redundancy scheme has processed 1,099 redundancy forms and started making payments to affected individuals.

The report said other trade creditors of Jarvis Rail and Fastline plant hire are unlikely to receive the 33.8m they are owed.

HM Revenue and Customs is also unlikely to get its 19.7m, nor will shareholders receive any dividend.

"After discharging the costs of the administration, and repaying secured creditors, the administrators do not expect any funds to be available to pay a dividend to the unsecured creditors of any of the companies," said Deloitte.

The total fee that Deloitte will receive is currently unclear, but the report said the firm billed 361,513 and 506,579 for its work on the rail and fast line businesses between March 31 and May 26 – an average hourly rate of more than 500.

Deloitte also said one other unknown creditor claims to have fixed charge security over some of Fastline's assets. This is being investigated.

Jarvis was reliant on Network Rail for about 90 per cent of its rail revenues, and was doomed when the state-backed body decided to reduce track renewal work by around 30 per cent. It came close to breaching its covenants in November 2009, according to a report to creditors of its accommodation services arm.

Directors tried to persuade its banks to extend its facilities or provide an advance, but were unable to. The report said they also tried to persuade Network Rail to speed up new work, and the organisation obliged on a number of occasions by paying for work in advance. Jarvis was also said to have used HMRC's Time to Pay scheme, and tried to delay repayments of National Insurance and VAT.

Jarvis went into administration on March 25.

Company's timeline

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.

1996 – Jarvis buys rail main-tenance business Northern Infrastructure Maintenance Company for 9m.

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

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.

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

February 2010 – Jarvis issues a profits warning.

March 2010 – Jarvis is forced into administration.