British Steel has been placed into compulsory liquidation, putting up to 25,000 jobs at risk.
The insolvency process, first revealed by Sky’s City editor Mark Kleinman, followed a failure by British Steel’s owners, Greybull Capital, to secure additional funding from the government.
Ministers had, earlier this month, granted a £120m loan to cover the cost of an EU carbon bill.
British Steel had been seeking an additional £30m bailout as the company grappled disruption to its business from Brexit and the threat posed by cheap steel from China.
The government is understood to have sought greater investment guarantees from Greybull, which snapped up the business for £1 in 2016, in return for the cash.
But Business Secretary Greg Clark confirmed the additional funding was turned down on advice such a payment would have broken EU rules governing state aid.
Mr Clark later told MPs that there were potential buyers for the business “that have already made contact”.
At Prime Minister’s Questions, Theresa May said the Treasury had granted help to keep the business running for now as options for British Steel’s future were explored.
The official receiver said: “The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site.
“I appreciate that this is a difficult time for the company’s employees and I want to thank them for their ongoing cooperation.
“The company in liquidation is continuing to trade and supply its customers while I consider options for the business.
“Staff have been paid and will continue to be employed.
“The court also appointed special managers to assist me with my work and they are engaging with staff and their representatives to keep them informed, as well as contacting British Steel’s customers.”
British Steel employs almost 5,000 staff – the majority in Scunthorpe and the rest at its Teesside works.
The company supports around 20,000 more roles in the supply chain.
Roy Rickhuss, general secretary of the steelworkers’ trade union Community, said: “This news will heap more worries on workers and everyone connected with British Steel but it will also end the uncertainty under Greybull’s ownership and must be seized as an opportunity to look for an alternative future.
“It is vital now that cool heads prevail and all parties focus on saving the jobs.”
Meanwhile, Network Rail – which buys 100,000 tonnes of rail a year from British Steel – said it had plans in place “to carry out critical work on the railway in the coming months and beyond” and in the longer term to “continue to deliver the reliable railway millions of people depend on every day”.
Labour had called for the company to be nationalised as politicians pleaded for emergency help in advance of the insolvency process reaching court.
The party said today the compulsory liquidation was the result of failed Brexit and industrial strategies.
Unite assistant general secretary Steve Turner pledged support to help secure a new future and added: “While Greybull cannot be allowed to walk away scot-free and must be held to account for its stewardship of Britain’s second largest steelmaker, ministers cannot wash their hands of the Brexit farce and ongoing uncertainty that has placed the company in difficulty, nor allow a business of such strategic importance to UK plc to disappear like the steelworks of SSI several years ago.”
It is unclear whether the taxpayer has lost the £120m loaned to British Steel earlier this month.
A spokesperson for Greybull said: “Having rescued the business from closure over three years ago, we have worked hard to bring this important company back on its feet.
“Since 2016 we have arranged a financing package of more than £500m, appointed a new and talented management team, helped the business open up new markets and reduce costs whilst addressing long-term under-investment.
“The turnaround of British Steel was always going to be a challenge, and yet the business overcame many difficulties, and until recently looked set for renewed prosperity.
“The workforce, the trade unions and the management team, have worked closely together in their determination to strengthen the business, however, the additional blows dealt by Brexit-related issues have proven insurmountable.
“We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry. We are now focused on assisting all involved as best we can through this process.”