Leeds is first local authority to abandon plans after lawyers advise evidence is too weak for action

Leeds council’s in-house legal team has decided it has no grounds to punish contractors named in the Office of Fair Trading probe, in a move lawyers say is likely to be replicated elsewhere.

It is understood the council decided the legal grounds for suing contractors or blacklisting them for involvement in cover pricing were too weak. The decision will come as a relief to firms who feared the OFT’s fines would lead to commercial handicaps.

Although an official announcement is expected from the council in the next few weeks, a source close to the situation said: “The evidence given by the OFT is not enough to exclude contractors or claim for compensation. The evidence we have wouldn’t stand up in court.”

Councils looking to pursue action would have to prove that they had suffered a loss that was directly related to the cover pricing. They will also face difficulties in blacklisting contractors under EU procurement laws.

In January, Building revealed that Leeds had stepped up its investigation into 32 firms it uses. Letters were sent out seeking details of their involvement in bid rigging and it said it would look into excluding firms from future work, including the £1.2bn Yorbuild framework.

Leeds uses a lot of regional contractors, and it would have been the final nail in the coffin of many

Contracting source

Lawyers said its decision would affect decisions by other councils such as North Yorkshire, who had also looked at taking action.

Rupert Choat, a partner at CMS Cameron McKenna, said: “Other authorities in a similar position will face the same difficulties. It wouldn’t be surprising if they also reached the same view.”

The move was welcomed by the industry. Julia Evans, chief executive of the National Federation of Builders, said: “The businesses ruled against by the OFT have paid their fines – there is no need to punish them any further. It is time to move on.”

One contractor named by the OFT, who wished to remain anonymous, said: “This is really good news. Leeds uses a lot of regional contractors, and in the current market, it would have been the final nail in the coffin for many.” Another said: “Common sense has won the day.”

The OFT fined 103 firms a total of £129.5m for anti-competitive behaviour including cover pricing.