One of the government's biggest contractors has fallen into liquidation after struggling under £1.5bn of debt.

Carillion, the UK’s second largest construction company, has around 20,000 UK employees and is a major supplier to the government.

Following a weekend of crisis talks, company bosses today met with creditor banks RBS, Barclays, HSBC, Lloyds and Santander, to be told the lenders would no longer provide financial support.

The company is understood to have partnership contracts worth £1.7 billion, including cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining, schools, prisons and army base homes for the Ministry of Defence.

Carillion has the contract to run Chelmsford prison, one of the most troubled jails in the country.

Alex Mayer MEP said: “Carillion has been on the rocks for months but the Government has buried its head in the sand.

"Jobs, vital infrastructure projects and public services are now at risk.

“We need urgent assurances that this collapse will not hit our prison service.

“Sooner or later the Government must call time on the repeated failures of the private sector."

The prison will continue to run as routine, and any maintenance will continue.