Shareholders and creditors, not taxpayers, should take the financial “hit” of saving struggling construction giant Carillion from collapse, the Liberal Democrat leader has said.

Vince Cable rejected suggestions the company should benefit from a Government bailout to avoid major public sector projects being plunged into chaos.

Carillion is a key supplier to the Government and has contracts in the rail industry, education and NHS.

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It has met lenders to discuss options to reduce debts, recapitalise and/or restructure the group’s balance sheet.

Shadow business secretary Rebecca Long-Bailey said on Friday the Government must “stand ready to bring these contracts back into public control, stabilise the situation and safeguard our public services”.

But as the crisis deepened into the weekend Mr Cable, a former business secretary, warned the move should be avoided.

He told the BBC: “I think what has to happen in this case is the contracts have to be kept going and supporting the supply chain and the tens of thousands of workers and that can be done by the Government taking a lot of this in-house or re-tendering in other cases.

“The Government can’t just do a financial bailout.

“The shareholders and the creditors – the big banks – have got to take a hit, they can’t just offload all of the losses on to the taxpayer.”

Carillion has struggled since reporting half-year losses of £1.15 billion and a meeting was held on Friday to discuss its pensions deficit.

The Rail, Maritime and Transport (RMT), Unite and GMB unions all called for workers rights, including pensions, to be protected as a priority.

A Government spokeswoman said on Friday: “Carillion is a major supplier to the Government, with a number of long-term contracts.

“We are committed to maintaining a healthy supplier market and work closely with our key suppliers.

“The company has kept us informed of the steps it is taking to restructure the business.

“We remain supportive of their ongoing discussions with their stakeholders and await future updates on their progress.”