Managers from struggling private firm Amey have been trying to renegotiate its £104 million contract, but has failed to reach agreement with the council.

Today, Amey has been warning its 400 Newbury employees that “staffing reductions” were a “possibility” in a series of briefings.

An internal memo from council chief executive Jim Graham to staff said: “The council has indicated that at this stage it's prepared to consider some changes [to the contract], but not everything that Amey has asked for.

“Our councillors have said that if there are to be staff reductions, they

would wish to give any member of staff within Amey whose job was potentially

at risk, prior consideration for any council vacancies that may arise. We

are also in regular dialogue with the trade unions.”

The contract was announced in November 2001, when former council leader Keith Lock said the deal would “bring new skills and resources to complement those we already have in place.”

Before the council signed up, Amey’s share price collapsed after it revealed it had bid for too many PFI contracts. Since then, staff transferred from the council have had pay rises of up to 20 per cent, according to Unison.