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Contractor Birse Group has been hit by a loss of almost £10m after a costly lawsuit and a shakeup of its building division.

The firm’s interim accounts for the six months to the end of October showed the £667,000 profit it made in the same period last year had become a £9.923m loss by 31 October 2005.

The firm put much of it down to the £5.7m it spent on its lawsuit with Citibank after it was kicked off a construction site in Lewisham belonging to a bank subsidiary.

Birse also had to carry £2.5m of costs after almost halving its construction division by closing two regional offices. The subsidiary, Birse Build, now concentrates on public sector work in the north of England. The firm also blamed suppressed demand from the water sector due to regulatory reviews of water prices.

However it made £1.2m from the sale of plant firm the Cabin Company. Cash inflow into the business also improved from an outflow of £16.8m last year to an inflow of £2.8m from operations this year.

In a statement it said workloads were already increasing and it would be able to eliminate losses from Birse Build by the end of the next financial year.