The options to keep Channel 4 afloat are narrowing down to a tie-up with either the BBC or a commercial rival, it emerged on Tuesday, as the government appointed UBS to help it solve the funding gap in public service broadcasting.

Although the investment bank will investigate a series of options, people close to the situation said that other possibilities, including a privatisation of the state-owned broadcaster and public funding for Channel 4 from the BBC’s licence fee, were sliding down the agenda. Early indications of the government’s direction are likely to come by the end of next month.