The lion’s share of the job losses have come in the process and energy divisions, where some major oil contracts are maturing, including the £400m Shearwater project at Wallsend, Tyne and Wear.
But a City source said there had also been significant redundancies in the building and civils arms. In this case, the reason seems to be Amec’s withdrawal from competitively tendered work.
Figures to be released in the company’s report and accounts for the year to 31 December 1999 will show that staff numbers have fallen from 22 031 to less than 19 500 in a year.
Most of the job losses were made in the last quarter of 1999. More cuts are expected this year, although one source said: “The bulk of the downsizing has now been done.”
When Amec’s interim results were announced in September, chief executive Peter Mason said the capital projects arm needed to make considerable improvements to achieve his 3% target for operating margins. At the time, the division was making 0.7%. He indicated that a reorganisation into three divisions (investments, capital projects and services) would lead to job losses.
It wants to eliminate the loss-making jobs in construction
One source said redundancies in the construction businesses were inevitable because Amec was bidding for less tendered work. “It is reducing overheads generally.
The people who have gone have gone because Amec is not doing traditional contracting.
“It wants to eliminate the loss-making jobs in construction and is going for more negotiated work. Amec feels that the later it gets involved in the procurement cycle, the less likely it is to make a margin.”
Amec is the third contractor in recent months to announce large job losses. Laing said it was cutting 850 staff in October and last month Mowlem made 170 of its building and civils staff redundant in the wake of a strategic review (news feature).
Analysts welcomed the move as evidence of Amec’s commitment to longer-term partnered work.
I am happy to see there are virtually no Amec signs on commercial buildings
One said: “Anything that helps reduce overheads and replaces bread-and-butter commercial work with more added-value, partnered jobs is gratefully received. I am happy to see that there are virtually no Amec signs up on commercial buildings in the capital any more.”
Another analyst said: “Amec wants to do the same amount of work for fewer, better clients. It is not just cutting jobs to reduce its overheads; it will need fewer estimators and marketing people if it is doing less spec bidding.” Deutsche Bank expects Amec’s construction turnover to fall from £374.5m in 1998 to £355.8m in 1999. Mason was unavailable for comment.
- Last week, Mason was in the USA visiting Amec’s struggling US business Morse Diesel.
In the half-year to 30 June 1999, Morse made an operating loss of £4.4m, which was put down to project delays in the high-rise building market that the firm has traditionally operated in.
Mason has indicated that he wants to expand Amec’s US activities into new sectors such as pharmaceuticals and utilities, where the group has a considerable reputation in the UK.
It expects to make a purchase before the end of this year.