Administrators are expected to be appointed at some of its businesses tomorrow following talks with bankers and advisors.

The privately held company controls or has stakes in a portfolio of assets, including Austin Reed, the UK retail chain, the Lygon Arms in the Cotswolds, top London restaurant The Wolseley and a German department-store chain. The Dawnay Day businesses also include property funds, hedge funds and private equity. One of its operations is Dawnay Day Quantum, a commodities fund management specialist.

The two owners of Dawnay Day, Guy Naggar and Peter Klimt, have tried to raise cash in recent days but are thought to have run out of time.

Ernst & Young is understood to have a team working at the group’s headquarters in London’s West End, according to one report. This is being led by Alan Bloom, the veteran administrator who handled the collapse of Railtrack.

Dawnay Day carried out a £750 million refinancing at the beginning of the year, taking out a mortgage with Norwich Union, but the scale of the group’s problems means it now needs additional capital. Its troubles spilled out into the open at the end of last week when it was forced to sell a 20 per cent stake in F&C Asset Management at a loss of more than £80 million. The sale of the holding is understood to have resulted from a margin call from its financial backers.

Mr Naggar, 67, and Mr Klimt, 62, have set up scores of subsidiary operations and sources close to the situation are concerned the collapse could have a domino impact.

Subsidiaries include a number of property investment vehicles, some of which are listed on AIM. These specialise in buying property in countries including India, central and eastern Europe. Dawnay collects fees for managing the assets.

Mr Naggar and Mr Klimt are big art collectors. Much of their collection is housed at the firm’s head office. Two months ago, Mr Naggar and his wife Marion sold Lucian Freud’s painting Benefits Supervisor Sleeping at Christie’s for $33 million (£16.5 million).

Meanwhile, Channel Islands-based alternative investment manager Dawnay Day Milroy has underlined its independence from the UK group and the soundness of its business. Headed by investment managers Robert Milroy and Paul Meader and with offices in Guernsey and Jersey, Dawnay Day Milroy sees no impact on its business from the situation in the UK, where the Dawnay Day businesses include hedge fund management and distribution, private equity and property funds.