A major care services provider is winding up all its contracts with local authorities after regulators warned it was about to go bust.

Allied Healthcare said it was exploring ways to minimise disruption to continuity of care when it transfers its services and staff to alternative providers.

But the company blamed the Care Quality Commission who issued a warning over its weak position three weeks ago for its decision to pull out of the market.

The CQC said the company, which provides care for 13,000 elderly and vulnerable people in the UK, was likely to fail because it had failed to secure a lender to support the business after the end of this month.

The commission has now defended its actions, saying it had a duty to inform local authorities about the risk of disruption.

But the company responded that the warning had 'negatively impacted Allied Healthcare, leading a number of customers to transfer care services to alternative providers, and disrupting staff retention and recruitment.'

It said the CQC had 'intensified the impact of the challenging environment within which we operate and come immediately prior to the Christmas period, when pressures on care providers are at their highest.'

Allied Healthcare initially had agreement from its existing lender, RBS, to continue its support into the New Year, but the bank has now said it will provide facilities for only three weeks after the November 30 deadline.

CQC head of care services Andrea Sutcliffe said: 'I am glad the company is now communicating directly with everyone receiving care from its services, their staff and local commissioners to reassure and advise of their next steps.

'A short-term extension of the existing lending facility should also help support an orderly transfer of local authority care contracts to alternative providers.'

A spokesperson for Allied Healthcare said the company was 'actively exploring a range of options in order to minimise disruption to continuity of care, including the sale or transition of care and support services on a regional or contract-by-contract basis to alternative providers best placed to deliver care at a local level.'