Contractors post losses of £109m and £62m respectively following last year’s writedowns

It was a black week for the UK construction market as Amec was hit by a loss of £108m and Costain lost £62m.

Costain’s pre-tax loss, for the year to 31 December 2006, compared with a profit of £25m in 2005 and followed a £47m writedown in December. This was blamed on project delays and disputes, as well as losses in, and the closure of, the international division, which caused a loss of £27m. The firm also suffered from poor performances in its building and oil and gas arms.

The loss was broken down as £25m in the buildings division, £7.7m in civil engineering and £14.5m in oil and gas. Costain refused to list the contracts involved but it is understood that its Kingston Hospital PFI scheme in Surrey is seven months behind schedule.

Minutes from board meetings of the Kingston NHS Trust in the past two years show the project faced delays caused by the discovery of asbestos, damage to telephone cables and drainage issues.

Other problem projects are understood to include the decommissioning of the Dragon One nuclear reactor at Winfrith, Dorset, for UKAEA, two David Wilson Homes schemes and a station upgrade at White City, west London.

Andrew Wyllie, Costain’s chief executive, said the firm was continuing its consultation over redundancies.

We have a clear strategy for Costain and are committed to robust action

Andrew Wyllie, Costain

Meanwhile, Amec, which announced a £90m writedown in December, reported a pre-tax loss of £109m after hits to its built environment businesses and litigation charges.

This does not include the results of French engineering business Spie, sold last July, and its pipelines business, which it is selling. Last year Amec was hit by costs related to disputes and its withdrawal from loss-making projects. The built environment business lost £11.6m.

Amec intends to dispose of its non-core businesses as soon as possible during 2007 as it seeks to focus on the energy market.

Samir Brikho, Amec’s chief executive, said this week that Amec had received about 40 expressions of interest, but it is understood that only a handful of these relate to the entire portfolio of disposals.

Amec’s share price fell by 10.75p to 488.5p when its results were announced on Wednesday. Costain fell by 0.24p to 47.5p.