Construction giant Carillion has said it has "no choice but to take steps to enter into compulsory liquidation with immediate effect" after talks failed to find another way to deal with the company's debts.
The firms, which employs 20,000 workers across Britain, said crunch talks over the weekend aimed at driving down debt and shoring up its balance sheet had failed to result in the "short-term financial support" it needed to continue trading while a deal was reached.
It has been struggling under £900 million of debt and a £590 million pension deficit and has seen its shares price plunge more than 70% in the past six months after making a string of profit warnings and breaching its financial covenants.
Its collapse poses questions as to why the group continued to receive Government contracts despite issuing a number of profit warnings.
The Government has urged staff to continue coming into work and said "those already receiving their pensions will continue to receive payment."
Britain's second-biggest construction firm is understood to have public sector or public/private partnership contracts worth £1.7 billion, including providing school dinners, cleaning and catering at NHS hospitals, construction work on rail projects such as HS2 and maintaining 50,000 army base homes for the Ministry of Defence.
Carillion had met lenders HSBC, Barclays, Santander and Royal Bank of Scotland on Wednesday (January 10) to discuss options for reducing debts, recapitalising or restructuring the group's balance sheet.
Sources had said that a business plan tabled by the group during the meeting was knocked back because it failed to present a solid proposition for restructuring the business.
However, the company denied the plan had been rejected, adding that any restructuring of the business could result in a debt-for-equity swap.
The Government, pension authorities and stakeholders also met on Friday (January 12) in an attempt to thrash out a rescue package, with talks spilling over into the weekend.
The Official Receiver has now been appointed alongside partners at accountancy giant PwC to oversee the liquidation of the company.
Unions have called for urgent reassurance over the jobs, pay and pensions of thousands of workers following the "disastrous" news.
Officials from several unions representing workers on the railways, construction sites, prisons, hospitals and schools are seeking information from the company and ministers.
Shares in Carillion have been suspended on the London market following the liquidation announcement.