Unite pulls out of university project

Unite Group, a supplier of accommodation for students and health workers, revealed it has backed out of a key project with the University of Sheffield yesterday, sending its shares down 6 per cent.

The project, to provide and maintain 5,500 student rooms, was to be the largest ever accommodation transfer under the Government's public private partnership, which aims to use private sector expertise to improve public services.

Unite said it had been unable to agree final terms for the 30-year deal with the university and would write off £1.3m of costs related to the project in its accounts for the six months to 30 June.

The company's shares dropped by as much as 30 per cent in early trade to a three-year low of 105p, but recovered much of the loss to close down 8.5p at 144p. "The initial reaction was way overdone," Peter Ashworth, an analyst at Teather & Greenwood, said. "It's not such bad news to drop a project where returns aren't good enough and the underlying business remains strong."

Unite said scrapping the deal would not affect its ability to achieve its target of maintaining 8,500 beds per year, and that it was continuing to work with the university. It also said it would take a more selective approach to PPP contracts and disband its centralised PPP team, resulting in savings of about £300,000 a year.