Construction firms Carillion and Balfour Beatty are in talks over a potential merger that could create a £3bn company.

There had been murmurs that the pair were in the early stages of negotiations, and both boards moved to put an end to the rumours by putting out a statement confirming the news.

Carillion will be looking to capitalise on Balfour Beatty's dire state after the latter put out two profit warnings in the last three months which led to the departure of chief executive Andrew McNaughton.

"The Boards of Carillion and Balfour Beatty believe that the merger of the two groups has the potential to create a market-leading services, investments, and construction business of considerable depth and scale," read the Carillion release.

However, a deal is far from complete and there could be several sticking points that may have to be overcome before any potential merger is finalised.

Most notably, the Competition Commission may have something to say about it given that both companies are massively invested in the public sector.

The watchdog could feel that such a huge company could threaten the existence of smaller rivals, eventually leading to price hikes within the market.

Both companies have been working on large projects in recent times. Carillion has been working alongside the government to roll out broadband to 33 local authority regions across the UK, costing approximately £500m (€632m, $849m).

Balfour Beatty meanwhile, has been working on transforming London's iconic Olympic Stadium into the new home of Premier League football club West Ham United.

Carillion has recently been chosen as the preferred bidder to redevelop Liverpool FC's Anfield stadium.

If planning permission is granted, the London-based company will begin work on the £75m expansion on the home of the five-times European champions later this year, taking around 20 months to complete the job.