Building firms Galliford Try and Kier warn of spending cuts

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Public spending accounts for three-quarters of business at Kier and half at Galliford and has helped both firms weather the worst of the recession.

Both Labour and the Conservatives have promised to cut spending to bring government borrowing under control — threatening future income streams.

Kier chief executive John Dodds said: "The forthcoming election continues to provide uncertainties around the levels of public spending on construction work.

"While we cannot predict the future, we believe that public sector expenditure in our sectors will continue in some form, whichever political party is successful."

Dodds, who stands down next month after nearly 40 years at Kier, reported a 20.8 per cent rise in profits to £31.9 million for the six months to the end of December. Kier raised its dividend from 18p a share to 18.5p. Galliford made first-half profits of £6.4 million having recorded a loss of £37.5 million a year earlier.

Galliford, which won the contract to clear the site for the Olympic Park in Stratford, reported a 15 per cent rise in house sales in January but said the outlook for the construction sector is still mired by speculation over public spending cuts.