At the same time in another serious blow to the firm’s highways division, Costain has agreed it will now deliver its planned £1bn-£1.3bn A12 upgrade around Colchester in the south east as a joint venture rather than as sole main contractor as originally planned.

Both National Highways and Costain described the decision as ‘an agreed change in contracting strategy’ for the mega projects.

The decision comes at a difficult time for Costain, which recently saw two key directors leave the £450m turnover highways division.

Also just over a month ago, it suffered another major project setback when National Highways managing director of the Smart Motorway Alliance, Tony Slater, cancelled the firm’s 19-mile central reserve replacement project along the M62 over soaring costs.

Taken together the decisions are estimated to shrink Costain’s pipeline of work by around £1bn.

It is understood Costain has been given eight weeks to demobilise on the A66, where it has built compounds and is carrying out ground investigation.

Fellow partners on the route upgrade Kier and Balfour Beatty are understood to be ready to share Costain’s work package, with the remaining partner Keltbray staying with its smaller section.

A spokesman for Costain said: “We’ve been holding regular meetings with National Highways about the A66 scheme.

“As a result of those meetings, we’ve both agreed to a change in contracting strategy which will see Costain’s involvement in the development phase of the A66 come to an organised and managed end. We will continue to bring our innovation and expertise to other critically important National Highways projects.”

National Highways added in its own statement: “We would like to thank Costain for their work during the development phase of one of our most significant and complex projects.”

On the A12 Chelmsford to A120 widening project National Highways said: “Costain will continue to work on the A12 Chelmsford to A120 Widening project, supporting the delivery of the project’s DCO application and delivering a package of enabling works for the scheme.

“We will continue to work together on the A12 until the existing contract comes to its conclusion.”

It is understood the plan is to deliver the main contract element as a joint venture with Costain set to team up with Skanska or Balfour Beatty, although no decision has been taken yet on the new delivery set-up.