After recently strengthening its balance sheet, Sky News said that the Cabinet Office had been notified of Kier’s intention to acquire Tilbury Douglas, according to its sources.

Both firms refused to comment on the report this morning.

A city analysis told the Enquirer: “If a deal is on the cards it would probably require another big capital raise.

“Mind you buying companies was one of the two reasons Kier got into a mess with rising debt in the first place, the other being getting indebted to pay for property.”

A deal would complete the sale of key assets of Interserve, which was bought in a pre-pack administration by its own banks in April 2019.

Around 14 months ago, the Interserve Support Services business was sold to outsourcer Mitie in a deal worth £190m.

At the end of 2021, Interserve’s formwork, falsework and shoring business RMD Kwikform was offloaded to French-based scaffolding giant Altrad for a reported £140m.

This has left Interserve construction, now rebranded Tilbury Douglas, as the last remaining standalone entity.

Following the appointment of former Kier Major Projects boss Paul Gandy as managing director of Tilbury Douglas, it has steadily grown and built an order book of around £500m.

A deal would be a pivotal one for Kier, which until recently had also struggled with huge debts.

Chief executive Andrew Davies is now looking to build on a turnaround at Kier with a £7.7bn order book and a focus on the firm’s core businesses following last year’s successful £241m capital raise and the £110m sale of Kier Living.

Last year Kier returned a pre-tax profit of £5.6m from a £225m loss last time as turnover dipped to £3.3bn from £3.5bn.

While Kier’s net cash improved at 30 June 2021 to £3m (FY20: £(310)m), average month-end net debt remained around £432m.

Davies said actions taken to ‘right-size’ Kier would see the business target medium term revenue of £4-£4.5bn, with adjusted operating margin of around 3.5%.

Kier is due to give a half-year trading update on Thursday.