THE Spanish-led consortium, embroiled on a US$1.6 billion cost overrun dispute in building the crucial third lock for an expanded Panama Canal, has denied reports that it had stopped work, reports BBC News.

No date has been set for construction to stop said Consortium Grupo Unidos por el Canal (GUPC), as the consortium threatened to do so if it were not paid by the Panama Canal Authority (ACP) for cost overruns..

But consortium leader Manuel Manrique, president of the Spanish construction giant Sacyr, did say that 10,000 jobs are at risk while the ACP insisted it would not "yield to blackmail" after announcing that talks had broken down and work had stopped at the site.

Mr Manrique said work may eventually stop, if the building companies run out of cash. "But no decision had been made. There is still room for negotiation," he said. "We want an arbitration court to decide."

GUPC blames ACP for the breakdown, saying it had failed to agree to the payment. "Without an immediate solution, we face years of disputes in national and international tribunals," said a GUPC statement.

International Chamber of Shipping secretary general Peter Hinchliffe told the BBC that "any delay will have an impact on the industry".

Construction was due to be completed in June 2015, nine months behind schedule, with the overall cost of the project estimated at $5.2 billion, said Reuters.

The dispute has renewed suspicions - rejected by GUPC - that they had low-balled the big to win the contract, expecting to be paid later on a cost-plus basis, said London's Financial Times.

The contract was signed in 2009 for a reported $1 billion less than the next highest offer at a time when Sacyr was riding high on the back of a domestic construction bubble, said the FT.

ACP chief Jorge Quijano, said the canal has held general talks with other companies about work still pending on the expansion, but was open to more talks with the consortium.

He said the project would be completed in 2015 "with or without" the consortium and the issue was further complicated because Italy's Salini Impregilo, had taken over the lead from Sacyr.

He said a deal was still possible, but "we are not going to permit the project be halted for an excessive period".