Major outsourcing company Interserve has failed to secure investor backing for a restructuring plan and is set to fall into administration.
Interserve holds crucial government contracts for a range of services in prisons, schools, hospitals and has contracts for probation services affecting 36,000 offenders.
The firm is £650 million in debt and employs 45,000 workers in the UK.
Over 59% of shareholders rejected the proposal for the restructuring plan. A spokesperson for the company said: “The board of directors of the company is convening an urgent board meeting to consider its options.
“In the absence of any viable alternative, it expects to implement an alternative deleveraging transaction, which is likely to involve the company making an application for administration.”
The firm said the administration and sale is expected to be completed this evening and the business will continue to operate “as normal for customers and suppliers”.
Shares will be suspended from trading on the London Stock Exchange immediately.
The announcement is likely to draw fresh scrutiny on the role of major outsourcers in delivering public services and comes 14 months after the complete failure of construction giant Carillion, which also held public contracts
Jon Trickett MP, Labour’s shadow minister for the Cabinet Office, said: “The government has clearly learned nothing from Carillon’s collapse just over a year ago.
“This latest disaster, which could have been avoided, shows that the government is not prepared to change their dogmatic attachment to outsourcing, and it is costing the country dearly.”
A Cabinet Office spokesperson said: “This announcement will not affect jobs or the provision of public services delivered by Interserve.
“We are in close contact with the company and we are confident a positive way forward will be found.”