The agency delivering the Pounds 45 billion Building Schools for the Future (BSF) initiative has been forced by the credit crunch to go cap-in-hand to the European Investment Bank to secure funds.

The approach to the bank is an attempt to ensure that the vast school renewal programme is not undermined by the economic downturn.

Partnerships for Schools (PfS), the delivery body, has blamed the recession, claiming that the “challenging” financial conditions have meant UK banks are either unwilling or simply unable to back the scheme.

It is understood that talks are “well under way” with the European Union’s investment agency to bail out up to five local authorities that are struggling to find private cash.

Among those local authorities hoping to receive a funding boost is Barnsley, which is bidding to build nine new secondary schools, with the European bank supplying up to 50 per cent of the cash.

A PfS spokesperson said: “These are challenging times. Lending conditions in the private finance initiative market have tightened considerably and we are working extremely hard to manage the current challenges and minimise any delays.

“Exploratory discussions with the European Investment Bank are now well under way, with a view to them contributing to the funding of a number of BSF deals.”

It is not the first time the partnership has had to turn to the bank. It has already provided funding for Newcastle’s BSF programme.