JARVIS, the cash-strapped road and rail engineer, gave warning yesterday that it may collapse in weeks unless it can complete the £110 million sale of its stake in a London Underground consortium.

It said that without the refinancing that a sale would allow, it will have to seek emergency funding in January. Jarvis said: “Such funding cannot be guaranteed, nor can its terms, which may be materially disadvantageous to shareholders. If such support were not forthcoming, the group would be unable to continue to trade.”

The company said that it had offloaded about £25 million of property as it tries to win more breathing space from its banks. Alan Lovell, the new chief executive, said he was confident of selling the Tube Lines portfolio and the European roads business before the year ends.

Jarvis’s troubles began in 2002 after the Potters Bar rail accident, which took place on track that it maintained. Debts later spiralled as its accommodation services business failed to complete a number of Public Finance Initiative (PFI) school projects on time and to budget.

In summer Jarvis negotiated a credit extension with lenders until March 25. However, yesterday it said it needed to agree a further extension by January, adding “insolvency is a risk if we fail to meet our targets”.

Jarvis announced on Friday that it was selling its PFI business for £1.2 million to Hochtieff. But its most valuable asset, the Tube Lines stake, has taken the best part of the year to sell.

The company must also exit from its cash-hungry accommodation services contracts.

However, there is scepticism that a deal will be achieved because of the large number of parties involved. There are five equity partners and 15 lenders in the 15 accommodation services contracts that Jarvis is trying to pull out of.

The company said last month that delays in property construction contracts had created an £80 million working capital shortfall, prompting its decision to concentrate on road and rail. It also gave warning yesterday that “trading is continuing to prove difficult”. It intends to put out interim results before the end of the month and these will show a “substantial” deterioration in the group’s finances.

The shares closed 2p down yesterday at a record low of 8¾p. Trading at 575p two years ago, the group — which still commanded a market value of £1 billion last year — is now worth less than £15 million.

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