COUNCIL bosses have moved to quell fears over a £100m-plus city revamp after an outsourcing company’s collapse halted building work.

The liquidation of Carillion means a Sunderland renaissance project, spearheaded by the overhauling of the former Vaux Breweries site, has been paused.

However, council officials said the business’ failure will not derail the scheme, which it launched alongside Carillion as the Siglion joint venture to transform business, housing and leisure provision in the city.

Carillion, which employs 20,000 people across the country, fell into liquidation after talks between the firm, its lenders and the Government failed to reach a satisfactory conclusion.

The stricken company had been struggling against a near £1bn debt mountain and a £590m pension deficit, and had hoped to negotiate a compromise to shore up its balance sheet.

However, talks broke down on Sunday, with some unfounded reports claiming ministers were unwilling to back a request for £20m support to help Carillion secure further funds from banks.

At the heart of Siglion’s plans is a 60,000sq ft building on the former Vaux site, which is the first speculative office space to be built in Sunderland for a number of years.

The former brewery base is also earmarked to become home to retail, residential and leisure areas, with further homes planned for Chapelgarth and homes, cafes, restaurants and leisure spaces planned for Seaburn.

A spokeswoman said: “The council has been notified by Carillion’s liquidator that building work on Vaux phase one has ceased with immediate effect.

“The council is in discussions with Carillion and liquidators PricewaterhouseCoopers regarding next steps and to ensure work is resumed and the phase one building is delivered as soon as possible.”

Carillion, known for running training bases in North Ormesby, near Middlesbrough, Sunderland and Gateshead, which have helped youngsters learn skills across carpentry, bricklaying and decorating, was also previously involved with Durham City’s £150m Milburngate development, in a joint venture with Arlington Real Estate.

However, it was revealed late last year that Arlington and the Richardson family, which is also part of the consortium, had bought Carillion’s share in the scheme.

Bosses behind the project have already named bar chain Pitcher & Piano as an operator, with the riverside endeavour also featuring apartments, further restaurants and bars, an Everyman Cinema and offices.

Allan Cook, Arlington Real Estate managing director, said: “Arlington and the Richardsons have been the driving force behind the regeneration of Durham’s Riverside, which will continue with the ongoing development of Milburngate.

“This remains a once-in-alifetime opportunity to breathe new life into this important part of Durham City and, as a proud North-East business, we are committed to delivering a landmark development that will not only benefit Durham, but the wider North-East.”

Carillion’s fall into compulsory liquidation has put thousands of jobs at risk, but the Government said staff should go to work and will continue to be paid.

Many small firms are also waiting for Carillion, which is understood to employ about 100 people in a Newcastle office, to pay bills going back several months.

Prime Minister Theresa May’s official spokesman said that, initially, the Government will be paying staff through the Official Receiver to ensure public services continue to run as normal.

Carillion is understood to have public sector or public/private partnership contracts worth £1.7bn, including construction work on rail projects such as HS2.

Lenders including HSBC, Barclays, Santander and Royal Bank of Scotland are reportedly set to lose an estimated £2bn as a result of the collapse.

Carillion chairman Philip Green said: “This is a very sad day for Carillion, for our colleagues, suppliers and customers that we have been proud to serve over many years.”