The decision to drop out of the remaining phases of the £75m northern hub electrification programme came after a review found work was unlikely to be delivered on time and to budget.
Balfour Beatty had worked on two completed phases of electrification to lines in the North West, with five others yet to be finished.
Its job to upgrade the Preston to Blackpool line was scheduled to be completed by May 2016.
A Network Rail spokesperson said: “Network Rail has carried out a review to ensure we have the most efficient deployment of resources to deliver the next phases of this key improvement.
“By mutual agreement Balfour Beatty will be leaving the partnership delivery of North West electrification.
“This is the appropriate time following the completion of phase two between Manchester, Liverpool and Wigan.
“We will be retaining Balfour Beatty’s design services and a new contractor will be appointed shortly.”
Balfour was awarded the seven-year framework deal back in February 2014 for the design and installation of all electrification equipment for routes between Manchester-Preston-Blackpool and Manchester-Stalybridge.
The work packages were estimated to be worth more than £75m and followed on from Balfour’s involvement in Phases 1 and 2 of the programme covering the Liverpool-Manchester route.
Balfour said: “In the first half, phase 2 of the North West electrification project reached practical completion.
“However following a review of future schemes in the North West, it was concluded that the proposed alliance was unlikely to meet its stated objectives of delivering the scope of the work on time and to budget.
“In July, it was agreed with Network Rail that Balfour Beatty would not continue with the alliance framework for phases 3-7.
“We are working closely with Network Rail on the transition.”
Network Rail’s ambitious electrification plans came under scrutiny earlier this year as the Government became gravely concerned about out-turn costs
In June, it was announced electrification of the Midland Mainline and TransPennine routes would be paused amid soaring costs and missed targets.
The Government also said Network Rail would now review at least one fifth of the planned projects in the five-year plan in an attempt to control future spending.
But is said it remained committed to electrification projects for the more politically sensitive Northern Powerhouse.
A Department for Transport spokesperson said: “We are clear that we expect Network Rail to deliver electrification to Blackpool as planned so that passengers can benefit as soon as possible.
“It is for Network Rail to manage its relationship with contractors as necessary.”
