Engineering group Waterman is trading at 鈥渢he lower end鈥� of expectations and may have to write off up to 拢4m of bad debts, it said in a trading update on Monday.

The firm said it would also make further staff cuts by June in response to worsening markets.

It declined to reveal numbers but chief executive Nick Taylor said average staff levels in the year to 30 June 2009 would be 5% down on 2008.

The consensus forecast for the year is for a pre-tax profit of 拢5m on turnover of 拢128m.

The group said that trading conditions were 鈥渆xtremely difficult and challenging鈥� in Russia, Ireland and the UAE, and that it was owed money by a number of clients.

Taylor said: 鈥淎 large part of the potential 拢4m of bad debt will be from the UAE. Fortunately for us, we purposefully didn鈥檛 establish a large operation in Dubai because we didn鈥檛 think it would be a long-term market.鈥�

A company statement added: 鈥淲hile for the most part, cash collection across the group has been good, we have seen a small number of instances of projects being suspended and clients suffering financial difficulties.鈥�

Last week the Association for Consultancy and Engineering called on business secretary Peter Mandelson to help members recoup an estimated 拢400m of bad debt in the UAE.

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