CONSTRUCTION group Carillion is to slash around 900 jobs in the UK as it restructures its Crown House Engineering (CHE) business.

The company, created by the demerger from Tarmac last year, said it would be cutting about a third of its 2,700 UK staff in a bid to rectify "poor financial performance" in CHE, its mechanical and electrical engineering arm.

CHE, which is based in Wolverhampton, has its operations spread around the UK, with sites in the West Midlands, the North-East and North-West of England, Scotland and the south of England.

Carillion said it would be looking first at reducing agency staff employed at CHE, which number around 500, although it could not confirm if all the agency staff would lose their jobs.

In the North-East, CHE employs around 300 staff from a base in Killingworth.

A spokesman said he expected the bulk of the restructuring to take place over the next six months.

The group said the shake-up at CHE followed a "thorough financial review" which showed a number of CHE contracts had been identified on which losses might be made.

"Growth in the CHE business has to date not been sufficiently controlled," Carillion added.

Carillion said it planned to focus CHE on its successful voice and data communications business and on winning larger contracts from key customers.

The changes are expected to reduce CHE's annual turnover by around a third, to £150m.

At present this turnover makes up around 10 per cent of Carillion's total figure.

Carillion added that it would take an exceptional operating charge of £25m in the first half of this year, relating to the contracts. It would also incur a one-off cost in the second half year of around £9m, relating to the restructuring.

Sir Neville Simms, Carillion's chairman, said it was "extremely disappointing" to be making the announcement "at a time when the group is otherwise performing well and in line with our expectations."

He added that the measures announced "fully recognise the difficulties identified in CHE and put the business on course to deliver the performance we expect from it."

Carillion employs a total of 9,000 staff in the UK.

A spokesman for the Amalgamated Engineering and Electrical Union said: "This is a bitter blow for our members. We will be seeking urgent talks with the company to minimise the impact of this decision and to save as many jobs as possible."

John Edmonds, general secretary of the general union GMB, said: "Yet again we see hundreds of manufacturing jobs going to the wall.

"Not a day passes without another sector of UK industry announcing catastrophic job losses.

"It is time for the Government and the Bank of England to act to relieve the appalling pressure on the manufacturing sector.