Contractor blames decline of Abu Dhabi venture as employee numbers tumble to 18,222 from 35,753

Laing O’Rourke has shut its dedicated Middle East arm and cut its global workforce by almost half to 18,222 people as a result of the severe downturn in the UAE.

The closure of the division, revealed by Building in June, marks a significant change in strategy for the UK’s third-largest contractor, which relaunched the business with a three-region structure in 2006.

According to its latest results, the Middle East arm has been subsumed into the Europe and Rest of the World division. The Australia and south-east Asia arm is unaffected. Employee numbers at Laing O’Rourke have fallen from 35,753 on 31 March 2009 to 18,222 at the end of March this year.

Chairman and chief executive Ray O’Rourke said: “The year proved our most challenging ever with a significant number of people leaving the group as we took decisive action to align business costs with current and anticipated workload.” He blamed the majority of the drop on the decline of its joint venture with Aldar in Abu Dhabi.

Redundancy payouts cost the company £16.7m but O’Rourke warned that further “decisive action” to reduce the cost base might be required.

Laing O’Rourke said there was uncertainty about public spending in the UK because the coalition government was “an unknown proposition”. The contractor added that it was “cautiously optimistic” about its place on Building Schools for the Future frameworks.

Turnover in the year to 31 March 2010 was £3.5bn, down 14% from £4.1bn the previous year. Revenue at its Australasia arm climbed 14% to £829.5m. In the rest of the business, revenue fell by a fifth to £2.7bn.

Pre-tax profit tumbled to £50m from £85m and the company ended the year with a cash balance of £716m, up from £614.3m in 2009. The order book fell to £8.2bn from £10bn.