Tram contractors in pay dispute

The tram network is expected to be operational by 2011

The company charged with moving underground pipes to make way for tram works in Edinburgh has been failing to pay its subcontractors for weeks.

Carillion said the "payment issues" were down to "contractual matters" and denied rumours it was going bust.

John Denning, Carillion director of corporate affairs, said "these sorts of matters are not out of the ordinary".

It comes as Edinburgh Council hit out at rumours that part of the tram network, line 1b, was to be shelved.

It is understood companies such as Carillion pay subcontractors as the work is done. If there is an issue with how some work has been done then the subcontractor is not paid until it has fixed the problem.

Subcontractors would have normally borrowed more money from the bank until the issue was resolved but following the recent economic decline it has been harder for companies to gain extra bank loans.

Mr Denning told the BBC Scotland news website: "The payment issues are very small and are driven by contractual matters, which are commercially confidential and we don't comment on them.

"These sorts of matters are not out of the ordinary.

"Carillion has an extremely strong balance sheet and within the context of Carillion whilst this is a very important contract, it is also relatively small."

Carillion has £5bn sales per year.