GLASGOW City Council's construction firm lost £1.2million last year.

City Building plunged into the red after another tough year for the industry, official accounts confirm.

It is the second time the firm – flagship of the council's arm's-length external organisations, or Aleos – has made a loss since its creation in 2006.

However, managing director, Graham Paterson, insisted that the firm was a relative success.

In comments in financial accounts filed with Companies House, he said: "The construction industry continued to face the economic pressures of the ongoing recession in this finan- cial year.

"However, the business continued to perform comparativ-ely well and closed the financial year in what we believe is a strong position."

City Building employs more than 2200 people and has one of Glasgow's biggest program- mes of apprenticeships.

It made its loss despite some Commonwealth Games contracts, including a new hockey centre and squash courts.

The firm is regularly cited by city leaders as a success – especially as other Aleos, such as City Parking, have struggled.

Moreover, City Building provided the local authority – which is both its owner and one of its biggest customers – with a "discount" of £3.2m in 2012-13. That was down from £5m in 2011-12.

Graeme Hendry, the SNP's leader in the city, said: "This is yet more evidence that the bad decisions of Labour over many years are strangling Glasgow financially.

"With Aleos such as City Parking and Property having huge debts hanging round their necks like dead weights it is very worrying that City Building is now losing money.

"City Building must be the only construction firm in the country guaranteed lots of work at the moment."

Opposition leaders have long questioned the creation of Aleos. City Building was spun off from what was once the old council direct labour organisation, which was responsible for, among other things, repairing city council houses.

It still fixes some of those homes, which themselves have been spun off in to the Glasgow Housing Association.

A council spokesman stressed that this contract was being extended.

He said: "City Building is performing well in a difficult environment and is making a significant contribution to Glasgow's economy in terms of jobs and apprenticeships.

"It will carry out a number of council-backed initiatives over the next couple of years. It will also have added security from the likes of school refurbishments and the extension of the contract with GHA."

The company, however, said that its trading performance was good enough to allow it to meet annual pension contributions as they fall due. But it hinted at a future council bail-out for its pensions.

"Any actions to address the longer-term funding position," it said in its annual accounts, "will necessarily be undertaken in conjunction with Glasgow City Council."

david.leask@eveningtimes.co.uk