Council highways officials and Amey management have been locked in arguments over whether the resurfacing works, paving and road repairs are up to scratch and whether penalty clauses should be activated.

Amey’s annual report showed the company has set aside £55m to cover the impact of an “unfavourable resolution” to the court case.

“Cash collections in the local government sector have proved to be particularly challenging this year, a position which has been exacerbated by the ongoing litigation on the Birmingham contract, ” said the firm.

Amey’s local government division booked a £55m exceptional charge in respect of the possible unfavourable resolution of ongoing litigation on the Birmingham contract and a revision of the contract’s profitability going forward.

This saw the division which turned over £950m plunged into a £41m loss in 2015 compared with a £56m profit the year before.

Overall the group managed to deliver a pre-tax profit of nearly £27m down from £96m in 2014 from revenue marginally ahead at £2.23bn.

Looking ahead Amey said it was securing work with a bid-win rate of 56% and a forward order book of £12bn.