The government was facing embarrassment last night after concerns grew about the financial status of Amey, a key partner in flagship plans for modernising services through public private partnerships.

Amey, one of the winners in the bids to upgrade the London Underground and a partner in many other PPP deals, has now lost 40 per cent of its stock market value in two days.

Amey executives blame city analysts for "badmouthing" the firm and undermining its position.