City unconcerned by ‘storm in an OFT cup’

The share prices of the major contractors involved were not hit by the news that 112 firms may be fined up to 10% of their turnover (see attached graphic).

As one analyst said: “The contractors told the City about the investigation last year. We all saw this coming, which is why it was a bit of a damp squib.”

Alastair Stewart, an analyst at Dresdner Kleinwort, agreed. “This is a storm in an OFT cup. In most cases this has been a problem at a local level and the big contractors now have systems in place to stop it.”

He said the larger firms would probably receive fines at the “small, single-digit millions-of-pounds level”.

John Dodds, chief executive of Kier, said the possibility of fines was a concern. “It focuses the mind, but the trouble is we can’t work out what it might be. What is a real concern to the industry though is how much time directors have had to set aside and how much we’re all paying out in legal fees.”

I’d be very surprised if the OFT imposed fines of 10%.

Garvis Snook, Rok

Garvis Snook, chief executive of Rok, said the company was not directly affected by the possibility of fines. “The investigation affects a couple of subsidiaries before we bought them, therefore the vendors would be liable for any financial penalties, not us.”

He doubted that listed contractors would receive heavy fines. “I’d be very surprised if the OFT imposed fines of 10%. It may do if it proves there were backhanders, which there seem to be nine cases of, but I can’t believe for one minute that would involve listed companies.”

But Kevin Cammack at finance house Kaupthing said: “The OFT is hinting that there may be a hardcore which are more guilty than others. If this group is identified then fines could be heavy.

“For the rest, a rap over the knuckles and a small fine is more likely.”