Work will continue on the long-awaited tram-train project linking Rotherham, Sheffield and Parkgate despite the collapse of its main construction contractor Carillion.
Fresh doubt was cast over the scheme, which is currently running £60 million over budget and is not expected to be complete until the summer - three years later than planned, when Carillion went into liquidation on Monday.
But Network Rail said work on the scheme would "continue for the time being" and the Department for Transport said it would look to put in place "contingency plans" for Carillion's projects.
Speaking at a meeting of Sheffield Council's cabinet on Wednesday, Cllr Jack Scott, cabinet member for transport and sustainability, said: "The Department for Transport and Network Rail are in talks at the moment but work is continuing.
"But there is no reason to suggest that the tram-train project is in jeopardy at all."
Rotherham MP Sarah Champion said she had written to Secretary of State for Transport, Chris Grayling, to ensure that the collapse will not lead to further delays, with the link, which will see trams run from Sheffield to Rotherham Central and Parkgate.
“The delivery of the tram-train link has been disastrous," she said.
“With repeated failures to meet deadlines and costs having quadrupled, the scheme now faces further uncertainty with the collapse of its main construction contractor.
“Carillion’s collapse is yet another blow to the delivery of the project and the Government must provide reassurance that it will not result in further delays in service starting operation.
“It is of course deeply worrying for Carillion’s thousands of employees, many of whom are based in South Yorkshire.
“The Government needs to be prepared to bring public contracts back into state control and act quickly to provide reassurances to Carillion's workers.”
A Network Rail spokeswoman said: “Carillion’s work for Network Rail continues for the time being as Network Rail works with the official receiver and special manager to ensure the continuity of its project work.
"Passengers can be reassured that their services will be running as normal today as Carillion's work for Network Rail does not involve the day-to-day running of the railway.
"Our aim is to ensure, as far as possible, that this news has as little impact as possible on our projects to grow and expand the railway network."