ENERGY efficiency business Eaga has blamed the Government’s spending cuts for a slump in revenue and profits.

The Newcastle-based Warm Front company announced before Christmas that it plans to make up to 700 people redundant and yesterday said income fell to £308.1m in the six months to the end of September from £391.5m a year ago, while its underlying profits dropped to £16.0m from £24.3m.

The Government is slashing funding for the Warm Front scheme, which installs energy-saving measures such as insulation in homes, by more than a third to £110m next year, prompting Eaga to undertake a major restructure of its business.

Eaga chairman Charles Berry said: “To deal with the scale and speed of this reduction, the group has taken prompt action to reshape its operational activities.”

The company is in negotiations with the Department for Energy and Climate Change to extend the Warm Front contract until March 2013.

Despite facing what he called it called an extremely challenging period, Mr Berry was optimistic that new projects such as fitting solar panels will lead to growth. He said: “The outlook for the group remains positive.”