Despite warnings from some, many firms dismiss the Railtrack effect
Railtrack's problems may have led some analysts to treat rail contracting companies with caution, but others — and the contractors themselves — say there is nothing to fear.

Following the announcement that administrators were appointed at Railtrack, Amey, Jarvis, Balfour Beatty, Carillion and Amec all issued statements saying they had reassurances that they would be unaffected by the change.

The five companies, which took over maintenance contracts on 1 April, said they have been told by the government and Railtrack that all contracts will be honoured, and liabilities met.

However, despite the companies' confidence share prices dived when the markets opened the day after the announcement that Railtrack had been taken into administration. Jarvis shares fell 22p, almost eight per cent, taking the value below 400p. The share value has since partly recovered hitting 400p as TheFB went to press.

Mike Foster, analyst at Granville Baird, said he expects Jarvis will be hardest hit, as it has a higher margins on rail work than other companies. 'Margins might not be maintained at such a high level,' he said. 'It's the stock we are the most cautious on.'

Jarvis' Rail Business is worth £300m a year, accounting for 30-40 per cent of the group's annual turnover.

Foster said that he was 'fairly cautious' over Amey, Carillion, Balfour Beatty and WS Atkins. Foster, however remained confident about Amec's future performance.

Conversely, Alastair Stewart, analyst at Credit Lyonnais Securities, said he had no concerns. 'Rail maintenance is ongoing. It's business as usual.'

He said he believed the companies were safe in their dealings with Railtrack: 'They are rock solid contracts,' he said.

The government has promised to invest £30bn in railways over the next 10 years.

Interserve has the contract for facilities management at Railtrack's HQ. Executive director Clive Groom said he was sent a 'very reassuring' letter saying that it is 'business as usual', and to continue dealing with the same managers.

City rumours suggest German investment bank WestLB, Japanese bank Nomura, US investment bank Babcock & Brown, and media group Vivendi, may bid for Railtrack.

The administrator, Ernst & Young, has admitted it has received several approaches, but predicted no decision would be made before Christmas.

The City has said that the failure of Railtrack could jeopardise the future of PFI.