AN engineering company faces a potential £1.6m hit following the collapse of a major outsourcing firm.

Van Elle says Carillion’s failure has pushed it towards a possible cash blackhole, with the business awaiting payment for several contracts.

Meanwhile, a regeneration body behind Sunderland’s £100m-plus revamp last night said it hopes to resume work shortly, after Carillion’s demise halted the transformation of the former Vaux Breweries site.

Siglion, launched by Sunderland City Council alongside Carillion as a joint venture to improve business, housing and leisure provision, says it is hoping for a swift resolution to “ensure no momentum is lost” on the project.

Bosses at Van Elle say they are braced for an “adverse financial impact” if the money can’t be recovered.

They added they will attempt to recoup the outstanding bill through talks with Carillion, its advisers and the Official Receiver, which is leading the liquidation process of the stricken firm.

Van Elle, which has an office in Washington, Wearside, is known for providing piling and ground engineering services, and had worked alongside Carillion to deliver track improvements and maintenance on behalf of Network Rail.

However, Jon Fenton, chief executive, said the company has yet to see any return for its labours, with work carried out in the last few weeks yet to be recompensed.

He said: “Van Elle’s outstanding debt and workin- progress exposure with Carillion is approximately £1.6m.

“Shareholders should note that, in the event Van Elle is unable to recover any monies owed, there would be an adverse financial impact on the group.

“It is too early to say whether there will be any effect on the commencement or completion dates of contracted work with Carillion, or what impact these developments will have on future work programmes, either in the rail sector or elsewhere.

“However, the group will monitor the situation closely.”

Referring to the potential impact on Siglion’s plans, which are spearheaded by a 60,000sq ft office development on the former Vaux site, John Seager, chief executive, said, in the main, it remains “business as usual”.

He also confirmed Siglion is not reliant on any continued investment from Carillion.

“The Vaux site has been locked down by liquidators, which is standard practice in these circumstances,” said Mr Seager.

“However, we are working closely with Carillion and liquidator PWC and we hope this will be resolved quickly and that we can ensure no momentum is lost and the Vaux site is delivered as expected.

“Carillion has already made its equity investment in full into Siglion, so for all intents and purposes, it will be business as usual.

“Tenants in our sites across the city will see no changes, and we will be writing to them to that effect.”

The former Vaux base is also earmarked to become home to retail, residential and leisure areas, with Siglion’s development plan including homes for the Chapelgarth area of the city, and homes, cafes, restaurants and leisure spaces for Seaburn.