Shares in educational computer firm RM plunged after the Government’s announcement to axe its school rebuilding scheme.

The company, which supplies computers to schools across the UK, said it had been named as preferred bidder for seven Building Schools for the Future (BSF) projects, which will be subject to review and "may be scaled back significantly."

Yesterday, shares dropped about 13 per cent at one stage on the news but later rallied after assurances from chief executive Terry Sweeney.

RM has been a major beneficiary of the BSF initiative in recent years, providing IT and software services, such as interactive whiteboards and classroom technology.

The company confirmed 14 of its BSF projects had reached financial close, but that the seven projects under threat were worth £200m.

Mr Sweeney said the group was "well-placed to adapt to changes in capital spending programmes."

He added: "We have strong relationships at individual school, local government and central government levels.

"We will continue to analyse the impact of the Department for Education's review and, as appropriate, update the market in due course.”