Shanks accepts œ9m Scot offer

Contractor Shanks & McEwan has accepted œ9 million from the Scottish Office in settlement of its long-running dispute over extra costs on its A1 and A74 road building schemes.

The deal is expected to open the door for the contractor - which has its core business in waste management and disposal - to seek a purchaser for its construction arm which city analysts say has been a 'management irritation'.

With several contractors showing an interest in the past, the œ9 million settlement could well result in a firm bid.

The contractor hit some difficulties on large civils projects.

A spokesman for Shanks & McEwan said: 'We outgrew ourselves. A large civils firm would have had no difficulty in settling the schemes but we relied too much on resolving them.

'With a firm our size, one big contract can play havoc - and we were in that position,' he said.

Over the past two years Shanks has made huge provisions, œ28 million in all, against disputed payments for road-building contracts.

A consequence of last year's œ20 million provision (œ11 million related to construction) was that the group went into the red for the first time, to the tune of œ6 million.

The firm revealed, at that time, that there was a further œ9 million unprovided for. The Scottish Office settlement resolves that situation.

More recently, Shanks & McEwan has moved to smaller projects, particularly design and build. A spokesman commented: 'These have been quite successful.'