Balfour Beatty has reportedly withdrawn itself from the remaining phases of the £75m northern hub railway electrification project in the UK.
The move is expected to delay plans to electrify the rail line between Preston and Blackpool.
The company decided to drop out of the programme following a review, which found that the project was overrunning and that it was also unlikely to be delivered on time and within budget.
UK infrastructure manager Network Rail (NR) spokesperson said: "Network Rail has carried out a review to ensure we have the most efficient deployment of resources to deliver the next phases of this key improvement.
"By mutual agreement, Balfour Beatty will be leaving the partnership delivery of North West electrification. This is the appropriate time following the completion of phase two between Manchester, Liverpool and Wigan.
"We will be retaining Balfour Beatty’s design services and a new contractor will be appointed shortly."
The electrification of the Preston to Blackpool railway line was scheduled for completion by May next year.
NR also noted that the project is currently on hold until a new contractor is appointed.
Blackpool South MP Gordon Marsden said: "It’s obviously a further blow to the progress of the electrification, not just in Blackpool but across Lancashire as a whole. The Blackpool to Preston line has already been delayed once.
"We do not know whether the rest of Lancashire will be affected in the way the Transpennine electrification has been affected, which is an indefinite postponement."