Jobs at risk as Carillion seeks £75million of savings

Keith Cochrane, interim boss of Wolverhampton-based Carillion, aims to take £75 million out of the £336 million a year it costs to run the business. Most of it will will come from the £267m spent in the UK, where Carillion employs around 20,000 of its 43,000-strong workforce.

Hundreds of jobs are already reported to have been axed as the company launches a major effort to cut out layers of management, but more are on the way as it targets £50m of savings next year.

The company employs around 400 people at its head offices in Wolverhampton, on the Ring Road St Mark's. It is also building the new Midland Metropolitan Hospital at Smethwick. This is currently running six months behind and is thought to be one of the four "challenging" contracts that account for about half of an £845million write down in the value of Carillion's construction work.

The company revealed on Friday it had made a mammoth half-year loss of more than £1 billion. As well as its construction woes, it has had to reduce the value of contracts in its key services business by £200million.

Mr Cochrane is running the company while Carillion seeks a permanent replacement to former chief executive Richard Howson, who stepped down after revealing the financial crisis in July.

He has unveiled a rescue plan that will see Carillion selling off some businesses and pull out of PPP work. It is already in talks to offload its Canadian business and its UK healthcare arm, which employs 8,000 working on maintenance, cleaning and catering.

Construction will shrink to just a £600m a year business, handling around 15 projects at a time, while Carillion concentrates on £2.4bn a year of support services work for Government departments like the MoD, corporate customers and regional public authorities and on infrastructure projects, primarily road and rail.

Mr Cochrane said the company "took on too many unprofitable contracts".

"In too many cases we were building a Rolls-Royce but only getting paid to build a Mini," he said. In future Carillion would be more choosy on the work it took on. This has already seen Carillion pull out of £10 billion-worth of contracts it had previously been considering.

The company is also aiming to cut its pension costs and Hargreaves Lansdown senior analyst Laith Khalaf said: "It looks like Carillion employees, past and present, are going to take some of the strain of the current crisis enveloping the company, which is planning to water down their pension benefits to rise at a lower rate of inflation, subject to trustee approval."