Jarvis to call in administrators

Rail maintenance company Jarvis has announced that it will go into administration after lenders refused to offer the company further credit.

The company has seen big reductions in its business since the beginning of the recession in 2008.

Jarvis said its creditors were now not prepared to offer it the money it needed to continue as a going concern.

The company said it had no option but to enter administration, and had asked for its shares to be suspended.

"[The company] has been impacted by economic conditions generally and, in particular, the very considerable reductions in rail and plant work volumes," Jarvis said in a statement.  "Trading conditions have been, and continue to be, difficult...following negotiations with the company's secured lenders, it has today become clear that sufficient support will not be extended to the company to enable it to continue trading as a going concern.  As a consequence, the directors now have no option but to take steps... to place the company, and certain of its subsidiaries, into administration."

Spending cuts

The decision means that the jobs of more than 2,000 Jarvis employees are at risk.

Bob Crow, general secretary of the RMT union, which represents rail workers, described the news as "another hammer blow for the rail industry" and blamed "Network Rail's cuts programme and the scrapping of essential renewals work" for Jarvis's collapse.

Jarvis's businesses involve rail maintenance contracts and rail freight services. Last year, the company's executive chairman, the former Conservative minister Steven Norris, complained that a reduction in spending by its main client Network Rail was hitting the company hard.

"It has been a painful process to absorb the impact of Network Rail's sudden reduction in workload," Mr Norris said.

Network Rail denied it was responsible.

"It's never easy to see one of our suppliers cease trading, especially when there is plenty of work available and investment in the railway is at historically high levels," said Simon Kirby, director of investment projects at Network Rail.

He added that he would be working closely with the administrators to ensure that work due to be undertaken by Jarvis would still go ahead. 

Posted at 08:09PM Mar 25, 2010 by Kelly Board in Insolvency  |  Comments[0]

The 2010 Budget

Chancellor Alistair Darling warned voters in his Budget not to put the recovery in jeopardy in the general election by voting against Labour.

The Budget has shown that a series of tax increase for the better are to be introduced as well as a cut on stamp duty for first time house buyers.

Darling cut this year’s forecast deficit by £11bn from the initial £178bn before insisting that labour had been ‘right about the recovery.’

The Tories however have hit back, describing the state of the economy Labour has put us in as ‘a complete mess’ and that Labour have also ‘done nothing to clear it up.’

 Furthermore, Darling has been accused of stealing Tory policies by Conservative leader David Cameron with regards to the changes in stamp duty and the imposed extra tax on strong cider.

Cameron also added, in a dig at Gordon Brown that, “The biggest risk to the recovery is five more years of this prime minister.”

Meanwhile, Nick Clegg, Liberal Democrat leader has slammed both Darling and Cameron saying the pair are ‘in denial’ about the scale in which spending cuts need to be enforced whilst completely dismissing the Budget as nothing more than ‘a political dodge.’

"This isn't the preface to a new government but a footnote to 13 years of failure," he added.

A leading economics expert has said of Darlings message that, "it's bad, but not as bad as we thought - and not nearly as bad as it would have been under the Conservatives".

Darling has set out the battle lines for the upcoming election by stating, “The choice before the country now is whether to support those whose policies will suffocate our recovery and put our future at risk.

"Or support a government which has been right about the recession, right about the recovery, and is right about supporting the people and business of this country to build a prosperous future."

The cut in stamp duty for first time buyers on house up to £250,000 in value has been made possible by the increase to 5% imposed on houses with a value of £1m or more, stamp duty on first time buyers will be suspended for two years.

A series of other measures introduced targeting high earners were also unveiled , this is likely to go down well with Labour MPs that are fighting an election next month.

Darling said that the inheritance tax threshold is to be frozen for a further four years, this is in order to aid covering the cost of care for older people.

He also announced that there will be a cut in tax relief on pensions for those that have an income above £130,000 whilst an end will be brought to some personal tax allowances on people with an income of more than £150,000.

The government will also be sticking to a 2.2% real terms rise on spending during 2010, however Darling has warned that cuts after the start of next year will be the ‘toughest for decades.’

The Conservatives have been demanding an earlier cut, however darling has hit back at this saying it would be both dangerous and wrong whilst risking derailing the recovery.

"The task now is to bring down borrowing in a way which does not damage the recovery or the frontline services on which people depend," he said.

"The challenge now is how we invest as a country to support the industries of the future and allow the talent of the British people to flourish."

A crackdown on tax evasion also received heavy approval from Labour MPs, this is to be achieved through new agreements that have been put in place with the governments of Dominica, Grenada, and Belize – home of Tory ‘non dom’ donor Lord Ashcroft.

The Treasury is insisting all of the new spending measures are fully funded from existing budgets and not paid for by the £11bn less than expected borrowing.

The stamp duty cut is set to cost the Treasury £290m in 2011-12 after initially costing £230m in 2010-11, this will be funded by the increased stamp duty band on £1m properties that will be implemented next April.

Darling also said that he is planning to stagger the implementation of the increase on fuel tax increase, the intended 3p rise will now not be completed until January, with slight increases now expected in April and October before completing in January.

The costliest measure included in the Budget in due to the planned continuance on the winter fuel allowance for pensioners, with a £600m pledge going to that cause.

One of the changes will come into effect this weekend, with a rise in tax on beer, wine and spirits coming in at midnight on Sunday. Amongst these is a 10% tax increase on cider and alcopops, further increases will also be brought in on high strength cider.  Alcohol duties will also increase by 2% above inflation for two further years from 2013.

Tobacco duty also increased yesterday by 1% above the inflation rate before a following increase by 2% in real terms each year until 2014.

Further changes with aim of boosting business are also going to be brought in, business rates will be cut for one year from October onwards according to Mr Darling.  Due to this, more than half a million firms will benefit from a tax reduction, meanwhile state own banks will be forced to lend more to businesses.

Darling will also bring in a one-off £270m payment that will fund an additional 20,000 university places.  He also extended a 6 month job or training guarantee for under 24 year olds through to March 2012.

He also stated that stronger than expected tax receipts meant that government borrowing would be £167bn this year - £11bn down on the £178bn he predicted in the pre-Budget report in December.

He said that the deficit would continue to fall faster than previously forecast - dropping to £74bn in 2014-15, down £8bn on his earlier prediction.

The chancellor said he was standing by his forecast that the economy would grow by 1 to 1.5% this year although he slightly downgraded his prediction for next year to 3 to 3.5% compared to the 3.5% in the pre-Budget report. His forecast for the following years is unchanged.

He also revealed that the £2bn proceeds of a bank bonus tax was more than three times what the Treasury forecast in his pre-Budget report.

And he unveiled a guarantee to give everyone a basic bank account, giving up to a million more people access to bank accounts over the next five years.

Some of the more controversial measures in the Budget may not make it into law before polling day, which could be just six weeks away.

But the planned cut in stamp duty would probably stay in place whoever wins the election, as it is similar to existing Tory policy.

He also outlined plans to boost future economic growth, with billions invested in digital jobs, broadband for all, high-speed rail and biotech industries, using money from existing budgets.

If the Conservatives win the election they will produce an "emergency Budget" within 50 days of taking office which could reverse many of Mr Darling's measures.

The chancellor did not unveil any new tax increases, with the new 50% top rate of income tax expected to come into force from April and thresholds frozen.

Giving its reaction to the Budget, the SNP said Mr Darling should have scrapped the fuel duty increase altogether, adding: "The Labour government have shown they would rather save face with the City than support Scotland's communities."

Plaid Cymru's leader at Westminster, Elfyn Llwyd, said: "This unfair fuel tax is another example of an uncaring, out of touch government."

Business groups broadly welcomed the measures aimed at boosting enterprise.

CBI director general Richard Lambert said: "This was a clever, political budget. However, anxiety remains on how the deficit is going to be paid down, and the growth forecasts for 2011 and beyond are still on the optimistic side."

Derek Simpson, joint leader of the Unite trade union, said: "The last Budget before the election shows leadership and responsibility during difficult times."

Lord Pearson, leader of the UK Independence Party, said: "The three old discredited parties who are debating our economy have once again avoided the elephant in the room, in any discussion about our economy which is of course the cost of our European Union membership."

Green Party leader Caroline Lucas welcomed Mr Darling's plan for a "green investment bank" but said overall the Budget was "a wasted opportunity to seriously put fairness at the heart of the agenda".

Posted at 02:06PM Mar 25, 2010 by Marc Stenton in The Economy  |  Comments[0]