The government should brace itself for legal action after pulling the plug on the #163;55 billion secondary school rebuilding programme, according to expert warnings.

Plans to rebuild or refurbish more than 700 schools under Building Schools for the Future (BSF) were dropped on Monday when Education Secretary Michael Gove announced that he was scrapping the scheme, opening the door to the prospect of construction firms turning to the courts to recoup losses.

Contractors typically spend millions of pounds trying to win the hugely lucrative BSF deals, but now many may feel they have little option but to turn to litigation, according to lawyers.

Andrea Squires, a partner at London-based law firm Winckworth Sherwood, who has worked on almost 20 BSF contracts, said: “There are many schools that had gone right up to the wire, who were signing agreements and were very near to reaching financial close.

“Contractors don’t have a lot to lose. They have always been anxious not to bite the hand that feeds them, but if the hand is no longer feeding them then they might have a go.”

Mr Gove’s decision to scrap the programme is expected to save the Government #163;4 billion to #163;6 billion. A further #163;1 billion will be clawed back from the Department for Education from its unallocated spending.

A DfE spokesperson said: “The Government must give priority to the greater public interest by taking a tighter rein on spending.

“Any firm that is involved in the procurement process can withdraw right up until when the contract is signed, and the same applies to the local authority.”

News analysis, pages 18-19.