UPDATE 1-Carillion's former finance boss denies 'being asleep at the wheel'

(Adds FD comments)

LONDON, Feb 6 (Reuters) - The former finance director of collapsed British construction firm Carillion denied being "asleep at the wheel" on Tuesday as lawmakers questioned whether the company had taken on too much risk, putting thousands of jobs on the line.

Carillion, which employed nearly 18,000 people in Britain, collapsed on Jan. 15 when its banks halted funding, triggering Britain's biggest corporate demise in a decade and forcing the government to step in to guarantee public services from school meals to roadworks.

The failure has ignited a row over Britain's system of outsourcing public services - everything from hospital meals and prison security to the maintenance of nuclear warheads - to competing private companies who rely on government work for a large part of their income.

"No I don't believe we were asleep at the wheel," former FD Zafar Khan said. "I believe I did everything that I could have done essentially."

His replacement as finance director Emma Mercer, who had held other finance roles at the group, said accounting had become more aggressive in the years before it collapsed but Khan denied that there had been a concerted effort to take risk.

Khan's comments prompted a rebuke from opposition lawmaker Rachel Reeves.

"Four months after you left, the company went into liquidation with just 29 million pounds left, leaving thousands of people potentially without jobs, and thousands of people saving for pensions without the pensions they'd expected, but you did everything right at the right time," she said.

"Well done Mr Khan."

Earlier in the hearing interim Chief Executive Keith Cochrane had apologized for the company's collapse.

"I'm truly sorry," he said. "It was the worst possible outcome. This was a business worth fighting for and that's certainly what I sought to do during my time as chief executive."

Responding to questions, Cochrane said that net debt was too high at the end of 2016 and the company was trying to reduce it before it faced a deterioration of cash flow after March 2017.

The government is working to protect some jobs but 829 redundancies have already been made.

(Reporting by Paul Sandle and Sarah Young; editing by Kate Holton)