City report calls for job cuts

The country's top contractors were up in arms over a City analyst's report this week that argues they should cut a total of 20,000 staff if they are to survive.

The report from NatWest Securities called 'An issue of labour' (see page 8), concludes the industry needs to reduce its wage bill by 10-12% if a 2% margin is to be achieved.

The report goes on to say that this cut is best carried out by losing staff rather than reducing the salaries of existing staff.

It looks at the performance of the top 17 contractors and is particularly scathing about Mowlem which is says faces a considerable challenge.

'Its profitability has been one half the industry average whilst its sales rate per employee is low. Mowlem is the group which appears to present the greatest scope for change - we would also have to say that Taylor Woodrow, Wimpey and even Amec could benefit from improved profitability.'

But the report has produced a storm of protests from indignant contractors with Mowlem leading the way.

'It's all rubbish. We don't take the report seriously because of all the glaring errors in it. Our staff costs are 14% of turnover not 20%,' said a senior Mowlem source.

Another leading contractor, a new entry to the Stock Exchange, seethed: 'What we actually need is for NatWest to cut its wage bill by 10%, not us.'

Despite the furore, the report is now circulating the City and is packed with insights and statistics on the top firms. NatWest Securities analyst Rob Donald said: 'The figures are interesting for what they are, but are open to some interpretation. The report puts forward our reading of the situation.'

A Trafalgar House spokesman said: 'The issues in the report aren't that simple. Contractors have to balance short and long term interests. We need staff available to handle work as we come out of recession.'

But Michael Bottjer, chief executive of Tilbury Douglas, said the report was not unreasonable. 'There is certainly over capacity in the industry so margins will remain tight in mainstream contracting,' he said.