York rail giant Jarvis plunges into administration

York-based Jarvis, which has been hit by a substantial reduction in volumes of rail and plant work in recent months, said it needed more capital from its lenders and key client Network Rail, which owns and operates Britain's rail infrastructure, to enable it to win more work.

Its shares were suspended today at 9.4p, valuing the company at about 20m.

The company, which employs around 2,000 staff, is chaired by former Conservative minister Steven Norris.

"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.

"As a consequence, the directors now have no option but to take steps, together with the company's secured lenders, to place the company, and certain of its subsidiaries, into administration, and to request that trading in its shares be suspended with immediate effect."

Jarvis last month said it expected an operating loss of 5m for the year ending in March, and that it had incurred restructuring costs of about 3m between October and February.

But under new chief executive Stuart Laird, the group had shown early signs of success in its aim of diversifying its earnings, by winning new contracts with companies including London Underground.

Today's news follows warnings of heavy losses from the group last month after it said it was being hit by spending delays at Network Rail.

Network Rail has cut its track-renewal programme by 30% - a move which already led to a plunge in half-year revenues for Jarvis, to 114.7 million from 203.1 million a year earlier.

It said last month that the impact was expected to lead to a 5 million operating loss this year - but that a further 3 million in restructuring costs would likely mean an even deeper slide into the red.

Jarvis had been seeking to reduce its dependency on Network Rail for contracts and last month landed the 55 million Evergreen 3 deal from Chiltern Railways for renewal works to the line serving Oxfordshire and the Midlands.

But this was not enough to prevent its collapse into administration without the support of its lenders.

Its woes cap a chequered past for the group, which came close to collapse in 2004 after racking up huge debts on over-ambitious bids for Private Finance Initiative contracts.

It was forced into selling off a raft of businesses as part of a group-wide overhaul to survive.