Morale at support services group Jarvis was low this week despite upbeat statements from chief executive Alan Lovell over Christmas.

The group continues to shed staff amid speculation that it is to axe a further 10% of its employees by March. Two years ago, Jarvis employed 10000 people, but this number is expected to drop to about 3200 by April. However, part of the reduction in workforce can be explained by the transfer of staff to other companies after Jarvis disposed of certain parts of the business, including about 3500 to Network Rail.

At the end of last month Lovell said that the worst was over, despite revealing a £283.1m loss for the first six months of 2004, as the group faced the future as a much smaller rail and roads business.

Lovell said: “Since September many of the serious issues facing the group have been resolved, allowing us to draw a line under the past and look forward with much more confidence to a positive future with a smaller but profitable business.”

It was also revealed that Jarvis paid out £32m in professional and legal fees for the six months to 30 September. This does not include fees incurred in the busy months in the lead-up to Christmas, during which Jarvis made a series of disposals and reported its results.

Prospects for Jarvis brightened on Christmas Eve, when it sold its £146.8m one-third stake in Tube Lines to Spanish group Ferrovial.

As a result of the disposal, Lovell said that Jarvis had agreed a loan extension with its banks, which include Barclays, NatWest and Royal Bank of Scotland.

Shares soared 78% to 32p in response to the news.

However, staff at Jarvis still face gloomy times. Its rail and road businesses will operate out of its offices in York and elsewhere in the North. Staff in the London office, housing the legal, communications and other administrative functions, face the prospect of redundancy or enforced moves north.

In York, Jarvis is moving staff from its Jarvis House HQ to the smaller Meridian House nearby. Network Rail is moving into Jarvis House.