Memo reveals contractor is reviewing its building division and has set redundancy criteria

Costain is set to make a string of redundancies in its building division following a £50m writedown announced in December, it has emerged. The writedown was associated with problem construction, coal and gas contracts.

Andrew Wyllie, Costain's chief executive
Andrew Wyllie: "These decisions underline our commitment to taking robust management action to de-risk the business and provide transparency going forward."

Building obtained an internal memo warning of the redundancies, sent by Alex Vaughan, Costain’s group human resources director, to all 600 staff in the building division.

The memo said that a review of the building division was under way. It said: “A key part of this is a need to formally review the current roles and formalise the skills and capabilities required in the business.

“There may as a consequence, regrettably, be a small reduction in headcount through redundancy.”

Vaughan goes on to explain that five selection criteria have been established to identify those who will be made redundant. These are:

  • Skills and experience in the required role
  • Standard of work performance
  • Future capability
  • Attendance record
  • Disciplinary record.
A Costain spokesperson confirmed that the contractor was in consultation with 38 members of staff regarding the redundancies.

About the potential redundancies, the spokesperson said: “These actions are in line with our strategy to take the building division forward.”

Costain refused to name the contracts that were to blame for the £50m writedown, but they are thought to include the Channel Tunnel Rail Link extension.

The memo said that despite the problems in the building division, since January it had secured new work in the retail and education sectors.

Costain will announce its results for the year to 31 December 2006 on Tuesday. In the trading update in December it warned shareholders that it would not be in a position to pay out a dividend for the full year and would resume payment when “financially sensible to do so”.

Andrew Wyllie, Costain’s chief executive, said at the time: “These decisions underline our commitment to taking robust management action to de-risk the business and provide transparency going forward.”

In the first six months of the year, to 30 June 2006, Costain made a £20.7m pre-tax loss.

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