Shares in Carillion surged more than 20 per cent today as investors were hopeful the group will manage to secure new funding to avoid collapse later this week when it meets with lenders.

The construction firm, a major government contractor which is involved in the building of the HS2 railway, will hold crunch-talks with lenders this week.

The company is reportedly set to meet with HSBC, Santander and Barclays in a bid to cut debts and clinch new funding.

Shares in the group rose 20 per cent higher to 22.7p in afternoon trading.

High hopes: Carillion is involved in the building of the HS2 railway

Bosses are considering a rescue plan that would see it hand back loss-making contracts, revise others and potentially take financial support from the Government.

A loan from the taxpayer could be on commercial terms, or achieved via a renegotiation of contracts.

Carillion has struggled since reporting half-year losses of £1.15billion. Its share price plummeted 90 per cent after announcing its first profit warning last July.

They also fell after the company’s decision to breach debt covenants along with another profit warning in November, when it said annual profits would be lower than expected.

A Carillion spokesman said: ‘Carillion is in constructive discussions with a broad range of stakeholders regarding its options to reduce net debt and recapitalise and/or restructure the group’s balance sheet.

‘The group is currently finalising its business plan, which it intends to present to its financial creditors and certain other stakeholders on January 10.’

By David Madden market analyst at CMC Markets UK said: 'The firm has lurched from profit warning to profit warning in recent months as high debt levels and a cash flow problems.

'Now the company is seeking assistance to help it bounce back, but the problem is that its bankers don’t want to over expose themselves to the company.

'Carillion does have a healthy order book of work lined up, it just needs a short-term solution to ensure its survival.'