A TROUBLED shipyard at the centre of a long-running dispute over two ferries has warned it is on the brink of administration.

Bosses at Ferguson Marine – the last commercial shipyard on the Clyde – said they had begun the process of appointing an administrator by the end of next week.

They have been at loggerheads with Caledonian Maritime Assets Ltd (CMAL), a public body that owns CalMac’s fleet and assets, for months over the delivery of two vessels.

The £97million ferries contract is delayed and substantially over budget, with an ongoing dispute over who should foot the extra bill.

Read more: Government rejects offer of stake in Clyde shipyard

Ferguson Marine is owned by Scots tycoon Jim McColl’s Clyde Blowers firm.

It was previously reported the Scottish Government is preparing to nationalise the yard to ensure it stays open.

First Minister Nicola Sturgeon insisted ministers are "determined to find a solution that will protect jobs and secure the future of the yard, and we will be continuing work over the weekend to find a way forward".

An insider said the Scottish Government wanted to get control of the yard and oust the current management, while Clyde Blowers was equally determined not to let the government acquire the yard for a nominal sum.

The source also said Mr McColl’s relationship with Ms Sturgeon had “broken down”, and they felt that if Alex Salmond was still First Minister the problem would have been resolved.

Gerry Marshall, chief executive of Ferguson Marine Engineering Limited (FMEL), said: "It is with great regret and disappointment that the directors of FMEL have served notice to appoint an administrator to the company.

"This decision has not been taken lightly, but the directors do not consider there to be any other options in the current circumstances.

"However, the directors will continue to support the shareholder and the Scottish Government to realise a positive outcome for the business and its employees."

A statement from Clyde Blowers also expressed "great regret" over the situation.

It added: “We understand that this decision has not been taken lightly and is fundamentally due to CMAL and the Scottish Government’s inability to find a resolution to the additional costs encountered during the build of the two prototype LNG dual-fuelled ferries.

“As shareholder we have provided a number of viable proposals to avoid the process of administration and save the jobs of 350 employees, however CMAL and the Scottish Government have consistently refused to participate in productive discussions, leaving the directors of FMEL with no other options given the circumstances they are faced with."

Letters: Nationalisation is not the answer for the troubled Ferguson Marine yard

It comes after the Scottish Government rejected an offer to take a stake in the shipyard.

Mr McColl, a high-profile Yes supporter, rescued it from administration in 2014, just days before the independence referendum.

Chris McEleny, SNP opposition leader on Inverclyde Council, said he was "bitterly disappointed" by the latest news.

He said: "It was my view that Clyde Blowers had made what I believed members of the public viewed as a fair offer to share the pain of cost with the Scottish Government to ensure the completion of the vessels, but more importantly protect the long-term future of the yard.

"I welcome that the Scottish Government have preciously said they will act to protect the jobs of the workers of the yard. The immediate priority is to guarantee the livelihoods of the workers at the yard."

Mr McEleny also called for a review into whether CMAL should be wound up.

Stephen McCabe, the Labour leader of Inverclyde Council, said: “It’s very disappointing that we have got to this point.

"We are effectively back top where we were in 2014 when the Scottish Government encouraged Jim McColl and Clyde Blowers to take over the yard and bring it out of administration. It now faces a very uncertain future.

“I think there are still grounds for an agreement between the government and Clyde Blowers.

“There are significant issues around the contract, but for the life of me I can’t understand why both parties can’t find a way to work in partnership and help grow the yard.

“The irony is that the government contract that was supposed to give a fresh start for the yard is the thing that’s brought the yard back to the brink of administration.”

A Scottish Government spokeswoman said: “Our priority remains to ensure the completion of the vessels under construction, secure jobs for the workforce and protect the future of shipbuilding at the site.

“We have been working to secure a future for the shipyard for two years, and it is disappointing that we have not been able to reach a commercial solution with [Clyde Blowers] that would have prevented administrators becoming involved.

"We appreciate that this will be a concerning time for the workforce, their families and the local community, and we would like to reassure them that we are committed to maintaining the jobs on the site and building a secure future for the yard and its workforce."

She said it would continue to work closely with trade unions in the coming days and weeks.