Brexit restructuring to cost UK engineering firm Babcock £10m

The company also expects to pay additional costs of around £10m per year due to the restructuring

Babcock is taking action to ensure smooth trading can continue after Brexit (PA)

British engineering giant Babcock has revealed it will take a £10m tax hit this year linked to a restructuring to ensure the company can continue trading after Brexit.

The group is changing its aerial emergency services businesses to comply with European operating requirements, and said ongoing additional costs relating to the new structures will be around £10m per year.

The firm also said underlying earnings expectations for 2019 remain unchanged, with slightly higher margins offsetting slower revenue growth.

Total revenue is expected to drop to £5.2bn, compared with £5.36bn in the previous year, due to lower activity in its rail business.

Chief executive Archie Bethel said: “We continue to make good operational and strategic progress and won some great new contracts in the period including an expansion into the aerial emergency services market in North America, a significant win in Australia and securing the next 10 years for our rail business.

“Whilst preparing for the UK exiting the EU and for our QEC and Magnox contracts coming to an end, we continue to grow our business across our three key markets of defence, aerial emergency services and nuclear.”

Shares in the group were down as much as 7.6 per cent in early trading.

Analysts at Shore Capital said: “The short-term performance of Babcock remains frustrating for investors, in our view, with additional charges and some revenue weakness from changing structure impacting operations.

“The long-term positioning still remains sound, in our view. We expect stronger growth to resume in due course.”

Additional reporting by newswires