Jarvis shares slide on Network Rail cut-backs

Shares in railway maintenance group Jarvis plunged more than 40% after the group issued a statement saying its business may be impacted by deferred track maintenance spend from railway operator Network Rail.

Shares fell 3.6p to 5p after the group said Network Rail had announced its intention to significantly reduce its track renewals volumes and expenditure in the year to 31 March 2010 for all of its four track renewals contractors. 

Jarvis is one of the four contractors - which also include First Engineering (part of Babcock), Balfour Beatty , and Amey Colas - whose businesses will also be affected.

Jarvis said it was seeking clarification of the financial impact of Network Rail's move and would update the market as soon as possible.

Yesterday, Network Rail said it would defer around 10% of its track renewal spend, a move which enraged rail workers union RMT.

The union said the group has deferred 28% of its track renewals programme because of financial pressures from the Office of Rail Regulation (ORR), the industry's safety watchdog. 

The union is demanding the re-instatement of the entire renewal programme and warned there could be more train crashes if this is not done.

'The efficiency savings demanded by the ORR are being translated into a massive assault on planned renewals, inspections and maintenance that raises the spectre of another Hatfield or Potters Bar,' RMT general secretary Bob Crow said.

The operator refuted claims that the cut-backs could endanger passengers. 'There will be no implications for passenger safety,' said a spokesman.

But while the operator and the union wage their war of words, Jarvis ' future is hanging in the balance.

Brewin Dolphin analysts have suspended coverage of Jarvis' shares and say Network Rail's cutbacks will have implications for both Jarvis' rail and plant divisions and potentially the future viability of the group.

In 2004, Network Rail and Jarvis accepted liability on behalf of the rail industry for claims brought over the Potters Bar crash - which killed seven people.