Van Elle is now preparing to write the money off as a bad debt following discussions with the  Official Receiver.

Network Rail contracts worth £2.5m to Van Elle which were due to start this year with Carillion may also be shunted back.

Van Elle chief executive John Fenton said: “Van Elle carried out regular work for Carillion as a specialist lead sub-contractor, principally in respect of rail improvement and maintenance work and, as previously confirmed, our outstanding debt and work-in-progress exposure with Carillion is approximately £1.6m. 

“We also identified approximately £2.5m of anticipated revenue for the second half of the current year which related to work with Carillion.

“Whilst the Group is continuing to engage with the Official Receiver in respect of this outstanding balance, it is now expected that we may recognise an exceptional bad debt charge of approximately £1.6m in its full year results. All of this debt arose after 31 October 2017.

“We have also had constructive dialogue with both the Official Receiver and Network Rail in respect of the £2.5m of anticipated revenue and whilst it is possible that some of the anticipated contracts may be delivered in the current year, the status and timing of specific programmes remains uncertain.”

Fenton added that: “The Board believes it is prudent at this stage to recognise that the disruption to the expected order book due to the situation at Carillion will impact the Group’s ability to achieve its previous expectations for the year as a whole.”

Interim results for the year to October 31 2017 show the firm made an underlying pre-tax profit of £5.4m compared to £4.7m last time on turnover up to £52.6m from £43.1m.