Barclays is in a hole. Traditional investors are furious that they have been snubbed in the bank’s capital-raising. They feel like second-class citizens to a trio of overindulged Johnny-come-lately investors from the Gulf.

But those institutional investors, led by Legal & General and Aviva, could find themselves in a hole, too. Their only real weapon is a veto of the entire deal, which is very much the nuclear option.

Do they really want to see the transaction collapse? It would almost certainly lead to a clearout of the Barclays senior ranks — executives whom, for all their faults, the investors still largely admire. It would probably lead to Barclays having to go, tail between legs, back to the Government for a bailout, one on inferior terms to those offered last month. The bank would also have to submit to the yoke of ministers and officials, saying goodbye to the swashbuckling investment banking activities it so loves and agreeing to curbs on dividends.

In this game of brinkmanship, the people with least to lose from a crumbling deal would be the Gulf investors. They would walk away with £300 million in break fees and their reputation as tough negotiators usefully enhanced.

Possibly, modest concessions can be extracted from them — enough to save the face of L&G and help to deter other companies from blowing a raspberry at pre-emption rights. But when institutional investors end up eyeball-to-eyeball with a recalcitrant company, four times out of five it’s the institutions that blink first.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive