Firms which allow their road works to overrun will face a tenfold increase in penalties to up to £25,000 a day under Government plans to tackle congestion. At the moment councils can only fine utility companies or those responsible for the works up to £2,500 a day.

"These new measures show just how serious the Government is about tackling problem road works which cost our economy £4.2 billion each year," said Sadiq Khan, the Transport Minister.

"There is no excuse for those companies who allow their works to drag on for longer than they should, causing inconvenience and frustration for the travelling public. The new charges and tougher inspection regime will provide a strong incentive for utilities to finish works on time or pay for the disruption they cause."

The maximum daily overrun charges will only be applicable to those streets deemed to be 'traffic-sensitive' by councils. Utility firms will not be permitted to pass the cost of these charges on to their customers under the plans, which go out for consultation on Monday 1 March 2010. The new inspection regime also means that utility companies which consistently fail to replace the road surface properly or keep their sites safe could be required to pay for additional inspections by local councils.

The announcement forms part of the Department for Transport's street works action plan, published last December, which aims to reduce the disruption caused by road works.