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 fate of the builder is sensitive for the government because Carillion has contracts with several departments, with projects ranging from hospitals and libraries to roads and the HS2 high-speed rail link.
The consultancy EY has been put on notice in case the company falls into administration.
In 2016 the Wolverhampton-based company, which employs 43,000 people globally, had sales of £5.2bn and until July boasted a market capitalisation of nearly £1bn.
The government has said it is "monitoring the situation closely".More news: Francis Coquelin set to join Valencia from Arsenal
Liberal Democrat leader Sir Vince Cable said the government must not bail out the struggling construction company, the second largest in the UK.
Unite assistant general secretary Gail Cartmail, said: "The Government must consider all options while the future of Carillion hangs in the balance, including bringing contracts back in-house".
The company held talks with its lenders and advisers in London on Wednesday.
The reported that David Lidington, who was moved to the Cabinet Office as part of Prime Minister Theresa May's reshuffle this week, convened the meeting with Business Secretary Greg Clark, new Justice Minister Rory Stewart, new Transport Minister Jo Johnson and Liz Truss, Chief Secretary to the Treasury.More news: House votes to renew surveillance powers revealed by Snowden
A Government spokesperson repeated a statement given to Sky News last weekend which said it was "committed to maintaining a healthy supplier market and work closely with our key suppliers".
Last 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 past year, when a massive profit warning sent its shares crashing by 75%.
Its share price plummeted 90 per cent after announcing its first profit warning in July a year ago.
The company has been working on a plan which it said "will provide the basis for the agreement of a proposal to restore Carillion's balance sheet".
They added: "Based on our current trading assumptions (Dec' 18 EBITDA £188m with material downside risk) and our estimates of the mounting debt ( £1.1bn), likely additional supply chain funding/working capital unwind ( £300m) and pension liabilities (£600m), we now see no equity value".More news: Government reveals plans to eliminate avoidable plastic waste
"We will not comment further unless it becomes appropriate to do so".