Consultants and contractors are predicting that five PFI prisons will be scrapped under new Tory justice policy, frustrating shortlisted firms

In a speech on Wednesday, the justice secretary Kenneth Clarke said too many people were in prison and the government would research alternative forms of rehabilitation.

Seven firms are on a framework for the five prisons: Balfour Beatty, Bouygues, Carillion, Interserve, Laing O’Rourke, Skanska and Wates.

One contractor said they met with the Ministry of Justice last week and said that although there was no clear indication, they now expect all five to be scrapped.

A consultant close to the prisons programme said he also expects all five to be cancelled, though there is hope for one in Runwell, Essex, due to its advanced stage. Sites were being sought for the other four.

A Ministry of Justice spokesperson would not deny that the prisons are being cancelled, but called it speculation.

n As Building went to press, an announcement was expected imminently from the Department for Education over the future of the £55bn Building Schools for the Future programme. It is expected that the majority of schemes that have not reached preferred bidder stage will be put on hold, and a reprioritisation exercise announced.

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