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Tayside Contracts has warned it may need to shed staff over fears of “significant budget cuts”.

A letter to staff from managing director Iain Waddell asked workers to indicate whether they would be willing to take early retirement or voluntary redundancy as local authority cuts start to bite.

The group, which handles numerous services for Tayside’s three local authorities, employs more than 2,500 people across the region.

Richard Cranny, the deputy director of Tayside Contracts, said: “At some point we are going to experience what we anticipate to be significant budget cuts.

“That probably won’t be next financial year but certainly in the proceeding financial year. That is the kind of climate that we are being advised about.

“We have just asked people to express interest in either early retirement or voluntary redundancy.

“This is so we can see what kind of numbers potentially in the future there might be who would wish to go, which should certainly help us avoid any potential for compulsory redundancies in the future.

“It is really just asking the question. There are no guarantees either way in the sense that, even if people want to leave, we might not let them.

“This is a fishing exercise at the moment to see what lies ahead.”

It is unclear at this stage how many people could be forced to leave their jobs in the future if the group fails to make up the financial shortfall with voluntary departures.

Scottish Conservative MSP Alex Johnstone, a member of the committee on infrastructure and capital investment, said: “Hopefully this is just a test of the water and no redundancies will occur from this in the near future.

“I would urge everyone to get round the table and work something out, to keep Tayside Contracts viable and in business.”

Shona Robison, MSP for Dundee East, said: “Budget setting is at a very early stage for future financial years and it would be important to make inquiries to find out more about these concerns.

“Of course many parts of the public sector are having to make difficult financial decisions against the difficult financial backdrop and sometimes those result in staffing changes.”

Council members responsible for Tayside Contracts were unwilling to comment on the revelations without first meeting with company representatives to discuss the situation.

Local authority budgets are yet to be finalised.