The future of one of the Government's biggest contractors was thrown further into doubt last night as it struggles to seal a rescue deal and avoid a Carillion-style collapse.

Interserve is in desperate talks with lenders and the Government to agree a bailout to keep it afloat and secure 45,000 UK jobs.

But last night it was reported that the Cabinet Office has blocked a proposal to save the company, which has contracts with the NHS, schools and prisons, and makes around 70 per cent of its turnover from the UK Government.

Interserve is in desperate talks with lenders and the Government to agree a bailout to keep it afloat and secure 45,000 UK jobs

A source told the Financial Times: 'It's a bit like Brexit. No one wants No Deal on the table but no one can agree and [it] is running out of road and will hit overdraft limits soon.'

Interserve said last year it was on track to have debts of £650million by the end of 2018.

It has been locked in negotiations with lenders for around two months.

The Cabinet Office said: 'We are supportive of Interserve finding a refinancing deal with its owners that allows it to continue to deliver good value public services for the taxpayer and that brings the company the stability required to be able to compete for future business.'

Interserve declined to comment.