The contractor has been trying to reduce costs and collect cash on contracts since taking an £845 million writedown on the value of construction contracts in July and appointed accountants EY to carry out a review of its operations.

However in a further profit warning today Carillion noted debts have spiralled as a result of payment delays and the impact of recent disposals, with full-year debt forecast to rise to between £875m and £925m for the full year.

Carillion said: “In its interim results on 29 September 2017, Carillion confirmed that it was forecast to be in compliance with its financial covenants as at 31 December 2017.

“As then indicated, compliance with its financial covenants was dependent on achieving its underlying forecasts, which assume that the normal pattern of receipts and payments continue alongside the completion of a number of PPP disposals and settlement receipts on contracts.

“The Group now expects that a combination of delays to certain PPP disposals, a slippage in the commencement date of a significant project in the Middle East and lower than expected margin improvements across a small number of UK Support Services contracts will lead to profits for the year to 31 December 2017 being materially lower than current market expectations.

“Given the impact of delays in receipts and disposals, the Group now expects full year average net borrowing in 2017 to be between £875m and £925m.

“Based on its latest forecasts, reflecting the items mentioned above, the Board now expects a covenant breach as at 31 December 2017.

“Following discussions with its principal lenders and with their support, the Board has concluded that it is necessary to amend the relevant agreements to defer the test date for both its financial covenants from 31 December 2017 to 30 April 2018 by which time it expects to be implementing its recapitalisation plan.”

Wates chief executive Andrew Davies is set to take over at Carillion as its new chief executive from April.

Interim chief executive, Keith Cochrane, said: “Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet.

“Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support.

“I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.”