Carillion PLC (LON:CLLN) shares dropped by almost 30% in late afternoon trading on reports that its lenders have rejected the embattled construction firm's business plan, and that it has lined up an accountancy firm as a standby administrator.
The company is a major supplier to the Government, maintaining prisons across the country and managing around 900 schools.
However, no announcement has been made on a business plan to secure its future.
The company was once valued above £2 billion but is now fighting net debts of more than £900 million, following a crisis sparked in July previous year when it issued a profit warning, suspended its dividend, and said key contracts were not losing money as debt rose.
Gail Cartmail, assistant general secretary of trade union Unite, which represents more than 1,000 workers at the company, said the government should consider bringing contracts back in-house.
Shadow business secretary Rebecca Long-Bailey said the collapse of Carillion could "provoke a serious crisis".
"The Government knows the disastrous consequences of a Carillion collapse so is doing all it can to avoid that happening".
The company needs £300m of emergency funding and lenders are under pressure from the Government to keep the company afloat.
Carillion is a major supplier to the Government and key contractor in the first phase of building the £56 billion HS2 rail line, but has seen its share price plunge almost 80% in the past six months after making a string of profit warnings and breaching its financial covenants.
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But it is perhaps best known for being one the largest suppliers of services to the public sector.
The firm has seen its share price plunge almost 80 per cent in the past six months after making a string of profit warnings and breaching its financial covenants.
Carillion also manages almost 900 schools, provides services to the NHS and works with National Grid.
"You can see that one the one hand, it's in everybody's best interest that Carillion continues, but at the same time it's hard to chart a way forward".
Projects involving Carillion in Scotland also include the electrification of the central Scotland railway line through Shotts. The long-awaited route is due to be finished this year following lengthy delays.
A Government spokeswoman said: "As Carillion is a major supplier to Government it should come as no surprise that we are carefully monitoring the situation while working to ensure our contingency plans are robust".
The Pensions Regulator said it was not commenting on whether or not they were attending specific meetings, but a spokesman said: "We have been and remain closely involved in discussions with Carillion and the trustees of the pension schemes as this situation has unfolded".
It said the firm remained in constructive dialogue about short term financing while "longer term discussions are continuing".