ISG is taking on a greater proportion of smaller contracts in the London fit-out and construction market as large schemes like the Olympic Velodrome and the Nido student accommodation block in the City reach completion.

The regional construction business has the most work to do to shift emphasis to the private sector with 62% of its work currently coming from education and other public sector frameworks.

ISG also believes the retail market is showing early signs of improvement led by contracts in the food and retail banking sectors.

Chief executive David Lawther said: “While there is little doubt that our markets will remain highly competitive over the coming year, we are seeing a recovery in the spending programmes of our private sector customers.”

The company has reorganised its UK businesses into three distinct operations – Fit Out, Food Retail and Construction.

Chairman Roy Dantzic said: “We can see signs of recovery in all our markets, except UK construction, but lead times are shorter.

“Margins however will remain under pressure and therefore an improvement in profitability will be dependent upon the early signs of a pick up in economic activity being sustained into the second half of the financial year.”

Results for the year to July 30 show pre-tax profits were down to £8.7m from £11.8m last time on turnover down to £972m from £1,046m.