Stock was down as much as 15% in early trading on the London Stock Exchange after the Financial Times said a small team had been put together to keep an eye on the outsourcing specialist’s financial health.

The firm has been suffering from problem waste-to-energy contracts and, following a series of profit warnings in which the Board admitted to “a realistic prospect” of the group breaching its financial covenants with lending banks.

Last month it secured additional short-term funding to ease off its immediate financial troubles last month until March 31 at least.

Interserve is involved in a three-year restructuring programme launched by new management in October aimed at improving efficiency, its procurement process and simplifying the business.

On Wednesday, the Financial Times reported that the Cabinet Office was monitoring Interserve.

In response, Interserve said: “Last week we announced that we expect our 2017 performance to be in-line with expectations outlined in October and that our transformation plan is expected to deliver £40m-£50m benefit by 2020.”

It said it expected its 2018 operating profit to be “ahead of current market expectations and we continue to have constructive discussions with lenders over longer-term funding”.

The UK government has said it does not believe any of its major suppliers are in a similar position to stricken contractor Carillion which entered liquidation on Monday after racking up debt and pensions burdens of around £1.5 billion.

The Cabinet Office said: “We monitor the financial health of all of our strategic suppliers, including Interserve.

“We are in regular discussions with all these companies regarding their financial position. We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”