In what it called the "most fundamental restructuring" of Britain's railways since before privatization in the mid-1990s, Network Rail said taking the work in-house would lead to high standards of work, significant savings and improved safety.

"It is rationalization, not denationalization," Chief Executive John Armitt said in a conference call. "This is about getting direct control over a core element of the business."

Under the scheme around 18,500 workers will join the operator, essentially doubling its size.

While Network Rail denied the decision was a move back towards denationalization of the not-for-profit rail operator, others had a quite different opinion.

"It's quite clear now that we are on our way to the denationalization of the railway industry. The privatization is in the coffin," RMT union leader Bob Crow told BBC radio.

Seven firms are currently primary maintenance contractors for Network Rail, although the operator has been pulling back the work piece-by-piece for months.

Shares in engineer Carillion slumped by 16 percent, Peterhouse Group Plc -- owner of First Engineering -- was off 22 percent while Jarvis Plc fell seven percent.

Amec and Balfour Beatty, which are not as exposed to such work, had much smaller losses. Serco Group Plc's shares were up slightly, while those of Amey's Spanish owner Grupo Ferrovial were essentially unchanged.

RMT's Crow welcomed the move that is expected to be completed by summer next year. "It's an excellent decision for railway workers and an excellent decision for the traveling public," he said.

Network Rail took control of the railway infrastructure last year after the privatized Railtrack collapsed following a fatal crash at Hatfield, north of London, that exposed the poor state of the investment-starved rail system.

Maintenance costs ballooned after the crash.

The news, which affects mainline railways only, comes after two derailments on the separate London underground system last week that sparked a threat of strikes over safety.

Network Rail said the move would result in significant efficiency savings to the annual maintenance budget which stood at 1.2 billion pounds for 2002/2003.

The operator said the move would not affect rail-renewal contracts with third-party suppliers.

"What we'll be doing will be to introduce standard ways of doing the work, more consistency, more control over maintenance ....we have no plans of taking track renewals in-house," Network Rail Deputy Chief Executive Iain Coucher told reporters.