A trading update confirmed “our cost efficiency programmes remain on track.”

The cuts are coming from white collar staff among the 12,000-strong workforce rather than project delivery and site workers.

Around 4,000 staff are believed to work in office-based functions meaning one-in-six jobs will go.

Balfour said it has also been hit by “cost increases in a small number of contracts in the Utilities sector.”

The £10m cost increase has been offset by higher than expected returns on the company’s PPP asset disposal programme.

Balfour said performance in construction services was “robust” while the firm’s overall order book was stable at £15bn.

Balfour said: “Our order book remains strong despite the continuing uncertainty around governments’ investment decisions and the absence of larger, more complex projects.

“We continue to take action to mitigate the impact these market conditions have on our business while positioning the Group to take advantage of the positive medium and long-term prospects for infrastructure markets.

“We remain confident that 2012 full-year performance will be in line with expectations.”