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Rivals circle the wreckage of Jarvis

Many of the UK’s biggest contractors were this week surveying the wreckage of Jarvis, which became the most high profile victim of the recession when it was placed into administration last Thursday.

A host of big names including Kier, Balfour Beatty, Carillion, Costain and VolkerWessels are understood to be waiting in the wings to look at buying parts of the rail maintenance firm.

It is thought that Kier will make an enquiry about the facilities management division. Laing O’Rourke is understood
to have considered an approach but is said to have pulled back in the past few days.

The biggest competition looks set to take place over Jarvis Rail’s contractual obligations, with VolkerWessels joining the other firms expressing an interest.

VolkerWessels UK chief executive Alan Robertson said: “We have done what all of our competitors have done, which is to speak to some of the clients and, to a lesser degree, the administrators. It’s not the administrators that
will decide where it goes but the clients. It’s very early days.”

Several sources told Construction News they expected the divisions to be sold off separately by administrator Deloitte, with Jarvis’s rail and facilities management arms proving the most attractive to competitors.

One industry insider said: “If anyone picks them up, it won’t be Jarvis as a whole. We’d expect them to buy the contracts and the assets - and on that there will probably be a bit of a dog fight.”

Jarvis plc - the holding company for Jarvis Rail, Fastline (plant), Fastline Freight (rail freight) and Jarvis Accommodation Services (facilities management) - had a turnover of £345.8 million for the year to 31 March 2009.

Jarvis’ biggest client is Network Rail. The contractor is on several of the client’s frameworks, including an £800m track renewal agreement and the five-year £1 billion Multi Asset Enhancement framework.

Panmure Gordon analyst Andy Brown said: “While Network Rail can be a tricky customer, the long-term spending in the rail industry makes it an attractive sector to be in.”

Network Rail last week confirmed it had contingency plans in place to ensure work due to be handled by Jarvis could continue - but declined to comment further.

One industry source said they believed Network Rail may buy up Jarvis’s plant equipment and take the contractor’s workload back in house.

“They could probably acquire that equipment relatively cheaply and then have the ability to carry out work themselves. They have taken maintenance work back in house in the past because they decided they were not getting value for money by contracting it out,” the source said, adding that it depended on whether the
administrator believed it could get a better price for the plant by selling it to rival contractors.

Jarvis’s biggest single existing job was a £55m subcontract with Bam Nuttall on the £190m Evergreen 3 line upgrade for Chiltern Railways. Work on the project was due to start in the 2010/11 financial year.

Bam Nuttall said it was unlikely to be interested in acquiring any of the Jarvis business. Bam has historically appointed trackwork specialists on its contracts, and is not expected to be interested in bringing that work in-house.

Some industry experts suggested builders looking to expand into civils may be keen to acquire a piece of the Jarvis business.

While Willmott Dixon has indicated it wishes to expand further into the transport sector, a company spokesman said Jarvis was “not on our radar”. “We are looking to increase our workload within transport, but it will be more on the building, rather than civil engineering side,” he said.

A spokesman for administrators Deloitte said: “The position at the moment is that we are assessing all the businesses within the group, looking at the possibility of trading them while also looking for buyers, whether for the whole company or the subsidiaries.

“We will take a little time on this before we know the full outlook.”