Fresh blow as Connaught reported to be under investigation

Connaught, which warned on Monday it was in "urgent" need of additional funding, faces an investigation by the Financial Services Authority, the Financial Times said.

The FSA was said to be looking at several lines of inquiry including whether Connaught revealed price-sensitive information quickly enough. Initially Connaught and the FSA declined to comment but later the company said it had not received notification of a formal investigation from the FSA.

The crisis-hit company has seen shares tumble more than 90 per cent since warning of a 200m blow to revenues from Government spending delays a month ago.

The Exeter-based firm, which has a number of social housing maintenance contracts across Yorkshire, said on Monday it would breach banking covenants after warning its debts would be well over the previously-advised level of 120m by the end of August.

The firm, which has around 180 multi-million pound social housing contracts all over the country, is in talks with its lenders after a review had identified an "urgent requirement" for additional funds, in part due to pressure from suppliers and sub-contractors.

Chairman Sir Roy Gardner has drafted in four new directors to help Connaught to weather the storm.