The Government faces a setback in the planned sale of its remaining 40 per cent stakes in National Power and PowerGen, which was, until now, expected to raise £4bn .

The Barings fiasco comes in the middle of the international marketing of the shares and is a view that institutions will adjust their bids according to the situation in the markets.

Institutions have begun bidding for shares. However, one source close to the sale said: "A lot of the bids are market price related. You can adjust them if the market price falls." Even firm bids can be withdrawn before the Friday deadline.

Neither National Power/PowerGen would comment on the potential impact on the sale. One industry source said: "I don't think it's a show stopper but if there is a problem it is for the Treasury not the companies."