The early signs of a recovery were helping the company to make “sound progress” in line with market expectations, Amec said. Analysts expect Amec to report profits of about £110 million when it files results for the year to December 31 in March.

The company, which had reported a year earlier that industrial sectors including mining, forest industry, power and cement were delaying capital spending, said it expected to sign several significant contracts in the first quarter of 2004.

Shares in the group jumped almost 6 per cent to 267p on the positive statement and hopes of Iraqi contracts, which could be announced later this month.

Amec will lose some rail maintenance work in the UK, as a result of Network Rail’s decision to take the work back in-house over the next six months. But this is unlikely to have an impact on overall operating profits, the group said.

In a pre-close trading update the company said that the decline in investment it had seen for the last two years in North America appeared to have halted. However, conditions in the US commercial building market have remained difficult, with construction management failing to break even in the second half.

The shares also shrugged off news that Amec had lost out on one tranche of contracts it was bidding for in Iraq, to Bechtel, the engineering company with close ties to the Bush Administration. Amec was bidding for the work in conjunction with Fluor, its US partner, but failed to win the £990 million deal to work on power and transport infrastructure, funded by the US Agency for International Development.

A spokesman for the engineering group said that it was not too disappointed as there were several other significant contracts up for grabs, particularly those to reconstruct Iraq’s oilfields, for which Amec was well positioned.

Amec’s main markets of oil, gas, transport and infrastructure remain reasonably strong, the company said.

Sir Peter Mason, chief executive, said: “I am pleased with Amec’s performance in 2003, with sound progress having been achieved despite challenging conditions in some of our markets.”

Sir Peter added that Amec expected to show organic growth in 2004, with fundamentals in most of its markets remaining encouraging. The company was “ well positioned to benefit when our clients resume major capital investment programmes”, he said.

Stephen Rawlinson, analyst at Arbuthnot Securities, said: “The good news is inquiry levels are up in the industrial markets and that the environmental business picked up in the second half.”

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