Carillion, the troubled construction services group which is embedded in the HS2 high-speed rail link and other critical Government infrastructure projects, is racing to secure new funding within weeks to avoid collapse.

Sky News has learnt that Carillion, which has been sliding deeper into financial difficulty for months‎, is due to present a revised business plan to its syndicate of lenders in the coming days.

The plan, which has been drawn up by the company and its advisers over recent weeks, is said to have exposed‎ a funding gap running to hundreds of millions of pounds.

Carillion, which employs 19,500 people in Britain, has come up with a rescue plan which would involve handing back some loss-making contracts, revising the terms of others and potentially accepting financial support from the Government if it cannot secure it from private sector sources.

One insider said the company had been due to present the blueprint to lenders including Barclays, HSBC and Santander UK on or around 17 January but that that was now likely to be brought forward given the urgency of the situation.


"The next two weeks are critical," the source added.

The company has said it expects its full-year average net borrowing to be up to £925m, while it also has ‎a pension deficit of about £600m.

Those figures dwarf its stock market value, which now stands at just over £80m.

Carillion is understood to require an unspecified amount of new money from next month, with its banking syndicate largely reluctant to provide it.

Santander UK, the Spanish-owned lender, is said to have adopted a particularly aggressive stance with the company just days before Christmas, triggering fears that Carillion was on the verge of collapse.

The attitude of the lenders is said to have prompted senior figures close to Carillion to discuss the possibility of emergency financial support from the Government.

That could be either as a loan on commercial terms, an agreement to reprice some contracts or to allow Carillion to hand back loss-making work to Whitehall departments.

Image: Carillion employs 19,500 people in Britain

A Government source ‎insisted that there were no live talks about ministers bailing out Carillion, but several people close to the situation said that it remained an option if the banks refused to provide additional funding in the next ten days.

Talks are set to continue with the lenders next week, with the precise size of the funding gap dependent upon whether Carillion is able to unshackle itself from loss-making contracts, insiders said.

A number of disposals aimed at raising cash, including that of its Canadian operations, are progressing more slowly than originally anticipated.

Its only asset sale since the crisis erupted has been to offload a portfolio of healthcare contracts to rival outsourcer Serco for £50m.

If it survives in the short term, Carillion is working on a plan to swap £1bn or more of its borrowings for new shares in the company, which is one of the Government's most important infrastructure delivery partners.

Such a plan would leave its pension scheme, or the Pension Protection Fund, as a major shareholder.

The Wolverhampton-based group is the second-largest supplier to Network Rail and maintains approximately half of the UK's prisons as well as roughly 50,000 homes for the Ministry of Defence.

It is also engaged in building the Aberdeen Bypass and was responsible for constructing the Tate Modern art gallery in London and the Channel Tunnel.

This week, the company was dealt a fresh blow when the City watchdog launched a probe into the "timeliness and content" of statements it made to the‎ stock market about is financial position between December 2016 and July last year, when a massive profit warning sent its shares crashing by 75%.

Since then, the company has cleared out its executive team, including chief executive Richard Howson and finance director Zafar Khan.

Mr Howson was replaced on an interim basis by Keith Cochrane, the former Weir Group boss, with Andrew Davies due to arrive from Wates Group as his permanent successor on 22 January.

Carillion reported a first-half pre-tax loss of £1.15bn in September, while its most recent market update - three days before Christmas - was to inform investors that its lenders had agreed to defer a test of its borrowing agreements from 31 December to 30 April.

"Carillion is in continuing discussions with stakeholders regarding its options to reduce net debt and recpaitalise and/or restructure the group's balance sheet," the company said on 22 December.

"These discussions are progressing well, and the board still expects to determine the approach and to commence steps to implement the chosen opti‎on during the first quarter of 2018."

A Government spokesperson said: "Carillion is a major supplier to the Government with a number of long-term contracts.

"We are committed to maintaining a healthy supplier market and work closely with our key suppliers.

"The company has kept us informed of the steps it is taking to restructure the business.

"We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress."

Carillion and Santander UK declined to comment.