Nervous staff fear for this month's salary as Dutch parent announces that it is cutting off support for UK business.
The future of contractor Ballast is in the balance, with subcontractors downing tools because they fear they may not be paid.

The contractor, which employs 1000 staff, faces insolvency if a buyer cannot be found after Dutch parent Ballast Nedam announced on Tuesday that it was no longer willing to back the loss-making company.

A Ballast spokesperson said: "We are walking a tightrope. Ballast Nedam has washed its hands of us and walked away."

Last month Ballast Nedam installed Ruud Jacobs as managing director of the UK arm to come up with a plan to save the business.

Jacobs left the UK arm on Monday and returned to Holland, after his plan was rejected by the Ballast Nedam board because it would cost too much and take too long.

The UK board held talks this week with financial and legal advisers to establish if the company was solvent, and to find ways of saving it. A management buyout was discussed.

As Building went to press on Wednesday, a Ballast spokesperson said: "At the moment we are technically still trading."

But some staff are known to fear that they may not be paid for October. It is understood that money for this month's salaries has been set aside but if the company goes into administration there is no guarantee that those funds will be ringfenced.

The Ballast spokesperson admitted that work had stopped on many sites: "Yes – the sites are in the regions. I guess it is because the subcontractors are nervous."

Subcontractors are believed to have been nervous for several months and many are understood to have sent letters to the company during that time, warning that they would take legal action over any late payments.

A Ballast source said the firm's north-western division had issued a stark warning to subcontractors: "What the division has said is that we do not know for certain if we are trading insolvent or not, so the subcontractors have got to make a choice as to whether to continue on site."

Workers last week walked off the PFI East Lothian schools project over late payments. Glazing contractor Albann also pulled its workers off the project on Wednesday last week after it was not paid.

At least two of the six sites in the project were at a standstill that day.

A spokesperson for East Lothian council said that the private sector consortium of which Ballast was a part would consider replacing the contractor. However, East Lothian Schools is one of three PFI contracts that Ballast Nedam has guaranteed to back, even though it has pulled the plug on the UK arm as a whole.

A management buyout for Ballast, backed by another contractor, was set to go ahead in August but the Dutch parent refused the offer. This was because the UK arm wanted project risk liability and a heavy pension fund deficit to remain with Ballast Nedam.

The Ballast spokesperson said: "A buyout is a distinct possibility. We have got to do something to save the best bits of the business."

If a buyout does get off the ground, it is likely to be led by Phillip Cooper, managing director of the company's services division.

Ballast made a loss of £9.7m in the first half of this year. By ditching the UK arm, Ballast Nedam is expected to break even in its next set of results.

How Ballast got into this mess

  • July 2001 Ballast is slammed by its Dutch parent for half-year losses of £1.8m.

  • December 2001 UK chief executive and chairman Bob Heathfield departs after losses of Ballast Nedam’s international operations total £40m.

  • July 2002 Ballast loses £32m in the first half of the year. The business is put up for sale. Potential bidders are thought to include Montpellier, Hochtief and HBG.

  • May 2003 Building reveals that there are at least five bidders for the company, including a management buyout team.

  • June 2003 Sales literature is sent to bidders.

  • August 2003 A management buyout is rejected by Ballast Nedam. Ballast bosses say they were initially given the green light.

  • September 2003 Ruud Jacobs is seconded to UK arm with the job of coming up with a plan to solve the firm’s cash flow problems.

  • October 2003 Ballast Nedam rejects Jacobs’ plan, leaving its UK arm on the brink of collapse.