The prospects of a rescue deal being struck for a British hypersonic aviation pioneer appeared to recede this weekend when it emerged that talks with a Gulf-based state fund had stalled.

Sky News has learnt that negotiations between Reaction Engines and the UAE’s Strategic Development Fund, the investment arm of the UAE’s Tawazun Council, about it anchoring a recapitalisation of the company have begun to falter.

The reasons for the apparent breakdown in discussions with SDF were unclear on Sunday, although several people close to the situation said the situation was fluid and could be resolved.

They added that Reaction Engines was engaged in active pursuit of several other investment options.

Time is running out to secure a financial package that would prevent the company falling into administration, however.

Reaction Engines is said to require millions of pounds of funding support within days, with strategic shareholders BAE Systems and Rolls-Royce Holdings also said to have been asked to agree more flexible terms with the company.

Under the earlier discussions, SDF would have emerged as the single-biggest investor in Reaction Engines, which has developed cooling technology which is aimed at powering aircraft to Mach 25 – or 19,000 miles per hour – outside the Earth’s atmosphere.

More from Business

Sky News revealed earlier this month that the company had opened talks with the government about the deal, because of the sensitive defence and security implications in the context of the National Security and Investment Act.

A two-part financing that would include leading shareholders extending loans to the company before providing a further equity injection was the focus of the discussions in recent weeks.

The nature of the alternative rescue options being pursued was unclear on Sunday.

PricewaterhouseCoopers (PwC), the accountancy firm, has been put on standby to act as administrator if the quest for new funding fails.

A number of City investors have in the last two months slashed the value of their stakes in the business amid doubts about its survival.

According to Reaction Engines’ most recent update to shareholders, it grew its commercial revenues by more than 400% last year and is understood to have a strong pipeline of contract and R&D opportunities.

In January last year, Reaction Engines announced that it had raised £40m of additional equity, taking the total sum it had banked from investors to roughly £150m.

Founded in 1989, the company is chaired by Philip Dunne, a former defence minister.

Reaction Engines and Rolls-Royce both declined to comment.