The firm said: “The continuation of a long period of challenging market conditions, coupled with areas of underperformance in operational delivery on a small number of contracts, resulted in a £2m net loss for the UK Construction business.”

Results for the six months to June 30 show UK Construction fell into the red compared to a £4.5m profit last time on turnover up to £536.2m from £468.3m.

Interserve is now tightening up its construction bidding procedures and has made “further management, systems, procedural and other organisational changes across the division to enhance our financial and commercial controls and reporting.”

It added: “The substantial majority of our UK Construction activity is now focused on projects with an average value of less than £10m, constructing a range of buildings and infrastructure, plus selective larger contracts within our core competences.”

UK Construction is forecast to return to profitability in the second half of this year.

Market conditions were also challenging in the support services sector and overall Interserve saw group statutory pre-tax profits rise to £36.5m during the period from a £33.8m loss last time due to energy-from-waste contract problems on turnover steady at £1,648m from £1,633m.