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Top firms must axe 20,000 jobs says City report

THE countrys top contractors must axe another 20,000 workers if they want to start making decent profits.

That is the shocking verdict of an in-depth report by City stockbroker NatWest Securities into capacity among the industrys 17 biggest firms.

Robert Donald, construction analyst at County NatWest, warns that leading contractors failed to make deep enough cuts in staff numbers during the recession.

And he believes another round of job losses among the big names is inevitable.

The study assumes there will be steady but modest growth over the next two to five years, leaving contractors battling to make reasonable margins at low workloads.

Mr Donald said: It is clear there is no will to reduce the fragmentation of the industry through mergers and closures.

So contractors aiming to make anything like a 2 per cent margin are faced with the tough decision of yet more cuts in staff numbers.

He added: Productivity is really an industry-wide problem and every firm needs to benchmark its performance against competitors.

Mr Donald added that main contractors had done as much as possible to reduce subcontractors costs and should now look again at their own overheads.

County NatWest estimates an average 10-12 per cent cut in staff numbers is needed to deliver suitable margins for many of the publicly-quoted contractors.

Apart from the human cost, restructuring on this scale will cost 100- 150 million in redundancy payments.

By comparing sales against labour costs, the analysts have drawn up a list of firms which look vulnerable to staff cuts.

Top of the risk list is Mowlem, although firms like Taylor Woodrow, Wimpey and Amec are picked out as contractors that could greatly benefit from improved productivity.

Tarmac is ranked as a yardstick of efficiency, getting the best returns from staff who are among the industrys best paid.

The study also found that the option of cutting salaries to save jobs was ineffective.