Carillion jobs at risk over solar funding cut

The company wrote to employees at its energy services division, made up from the Eaga business it bought for £306 million earlier this year, saying it has launched a 90-day consultation on how to reshape the business.

The company believes the Government's plans to cut feed-in tariffs on installing solar panels on homes were greater and sooner than expected, leading to a "significant" reduction in its market.

It is understood that about a third of the jobs, or about 1,500 staff, could be axed, although no decision has yet been made.

Carillion bought Newcastle-based Eaga, one of the UK's biggest suppliers of heating and renewable energy services, in February.

But the Government has since announced that feed-in tariffs, which supplement the amount of money received by supplying solar energy to the National Grid, could be cut as soon as December 12.

The Government has said the move is to make small-scale renewable subsidies sustainable as the cost of solar panels falls, but it has attracted protests that the policy will wreck a growing industry.

Other industry players have also railed against the Government's plans. Solar panel contractor Breyer Group is reported to have said the policy could cost it 15% of its turnover, while social housing and home care group Mears has withdrawn from the solar panel business altogether.

The Local Government Association has warned the plans, which are being consulted on, would hit councils that had attempted to roll out the technology to poorer households.

Projects would be cancelled and low-income families will miss out on the chance to see reductions on their energy bills delivered by access to free energy from the solar panels, the LGA warned.

When Wolverhampton-based Carillion bought Eaga, it said it had identified the low-carbon market as a strategic area of growth and the acquisition would create a platform to build the UK's largest independent energy services provider.

Its shares were down 2% today. Caroline de La Soujeole, an analyst at Seymour Pierce, said: "We suspect that some of these job cuts would have happened anyway, reflecting normal job attrition following the acquisition of Eaga."

Carillion generates sales of more than £5 billion a year. Its portfolio of projects includes schools, universities, hospitals, roads, prisons and defence projects, the largest of which is the Allenby Connaught project for the Ministry of Defence involving the replacement and management of army accommodation in the south of England.

It has also upgraded large sections of the UK rail network such as the West Coast Mainline and constructed the M6 toll motorway.

PA