Taywood: £50m to quit

The downsizing of Taylor Woodrow's contracting business makes it a more likely participant in future construction industry's consolidation, says analyst Mark Hake in a report from stockbrokers Merrill Lynch.

The city reaction has been disappointment that Taywood's changes were not more radical. However, the cost of a complete withdrawal from contracting would have been prohibitive, the report points out.

McAlpine is the only UK contractor to have downsized a contracting arm at a cost of over £30m on a business with revenues of £220m - less than half of Taywood's.

In Taywood's case, redundancy costs would have run to more than £12m and the total cost of abandoning contracting, in cash and profit terms alone, would have topped £50m. There would also have been asset write-downs. It is hardly surprising that Taywood balked at this more dramatic course of action, says Hake.