Balfour Beatty will seek £5m compensation from Network Rail over its decision to bring all rail maintenance contracts in-house
The Network Rail announcement, made last week, is expected to trigger compensation clauses for early termination. Network Rail will also be required to honour guarantees of continued employment for staff on projects.

The 18,000 workers at Balfour Beatty, Carillion, Amey, Amec, Jarvis, First Engineering and Serco will now be offered transfers to Network Rail. Of the seven contractors, Carillion could be most affected, with 5000 employees in maintenance, renewal and on Channel Tunnel Rail Link projects.

A spokesperson for Balfour Beatty said that the company had expected to make an operating profit from maintenance work of around £5m in 2004 and would seek compensation for the loss.

A Carillion spokesperson declined to comment on a potential compensation claim but did criticise the way Network Rail announced the decision. She said: "We had no prior warning.

We heard about this on the 10 o'clock news."

Network Rail has yet to set a date to begin negotiations with contractors over compensation.

Transport secretary Alistair Darling this week reiterated Network Rail's commitment to the track renewal contracts but rumours are starting to circulate that call this claim into doubt. A Network Rail spokesperson this week categorically denied track renewals would be brought in-house.

A senior rail industry insider told Building that he had seen documents that proved that Network Rail had been considering taking track renewal contracts back in-house.

He said: "Network Rail has definitely considered taking the renewals work back alongside maintenance. It is waiting to see how the contractors and unions react to this decision."

The source said that it was likely that the unions would claim that a two-tier workforce had been created by the Network Rail decision as engineers would operate in the public and private sectors.

He said: "The fragmentation of the workforce is going to be a huge issue for the contractors. The big question is whether they are going to have the capacity to carry on in the renewals sector if they lose all their maintenance staff."