The Northumberland firm has given 80 of its 320 staff 30-days notice of possible job cuts.
Thompsons director John Burdon said the firms was scaling back its light waste recycling business because much of the waste from its skip hire side could no longer be recycled.
“The fact is builders are doing a better job of cutting waste, which means a lot more of what we collect cannot be recycled and has to go to landfill, which is getting too expensive.”
He said: “We have to notify quite a large number of people, all our HGV drivers for instance, but it won’t be anywhere near that number, if any.
“If we can find a buyers for this part of the waste recycling business then we can save jobs.”
Burdon said: “The demolition and quarrying side of the business is doing fine and heavy recycling performing well.
“Last year we recycled 200,000 tonnes of material and sold all of it.”
On the demolition side, Thompsons will start work next week on a multi-million pound contract to demolish the iconic multi-storey car park featured in the Get Carter movie.