The Strategic Rail Authority this week supported Network Rail's attempt to reduce profit margins for rail maintenance contractors
It emerged last week that Network Rail was looking at ways of halving maintenance contractors' profit. This would lead to a cut in Jarvis' margins from 9.5% to about 4% and have a knock-on effect on companies such as Amey and Amec.

Jim Steer, head of planning at the SRA, said: "A 9% profit margin is not out of the question if the contractors are taking some risk.

"If they are not taking risk, and typically, in the rail sector, I have to say they are not, then I would have thought that 9% is too high a margin – and we have to get costs under control.

"I'm jolly pleased to hear that Network Rail is on the case."

Steer denied that this would deter the private sector from investing in PFI-style deals for rail projects.

He said: "Initial indications that we have had – taking soundings on the East London Line, for example – are that there is a lot of interest from the private sector."

Steer said the SRA and the government were being careful in allocating risk.

He said: "It is a matter of ensuring that we are not introducing risk and uncertainty in the market place.

"The government has moved a long way over such issues. People have realised that the attitude we had in the early days of PFI, of lobbing all the risk over to the private sector, is not efficient."

Network Rail's proposals were met coolly by the City and contractors. They said that infrastructure firms ought to concentrate on simplifying procedures rather than reducing profit margins.