Taywood denies this. It says the restructuring, which was first revealed in Building (23 April) is intended to reduces its exposure to risk. The company will also merge its UK building and civils activities and shift the focus of its activities to its more profitable housing and property interests. Turnover for the construction arm will be cut from £600m to £500m this year.
But analysts in the City are increasingly convinced that the changes are a ploy to make the division more saleable. One said: "You begin to wonder whether it's the thin end of a wedge. It's a drive to make the business more profitable and should make it more attractive to potential buyers."
The construction arms of Tarmac and Amec have already been touted as potential buyers or merger partners. "Amec is the more interesting tie-up because it would open up a whole European dimension for the business," said one source.
"If you were a relatively new group chief executive like [Taywood group chief executive] Keith Egerton, you would take the long-term view that Taylor Woodrow is not a construction business," he added.
A spokesperson for Taywood refused to comment on speculation that the construction division was being lined up for divestment, saying: "The important thing is to get the construction business right today." He added that this would involve cutting back the division's international interests and focusing on larger projects where "rewards match risks".
Taywood will pull out of process engineering completely and will concentrate on private finance initiative projects and negotiated deals with serial clients such as BAA, Railtrack and Tesco.
He said that it would not be pulling out of all tendered work but that negotiated contracts would play a considerable part in future strategy.
It is estimated that the job losses are likely to cost Taywood up to £5m. One analyst commented: "They could have been more radical with the pruning."
The spokesman said: "We are not disclosing our redundancy bill. But the market need not worry. Our end-of-year results will not be affected." There is a significant imbalance in profitability between Taywood's divisions. In 1998, the construction arm made a pre-tax profit of £6.1m, housing made £56.3m and development £22.9m. However, construction's supporters argue that it eats up less cash than the other two divisions.
