British Steel is to go into official receivership after failing to secure funds for its future, putting up to 25,000 jobs at risk.
It follows last-minute talks held on Tuesday between Unite union and Business Secretary Greg Clark, to urge owner Greybull to find a solution.
On Wednesday, Clark said he had been advised it was “unlawful” to provide financial support “on the terms of any proposals that the company or any other party has made”, in comments echoed by the prime minister.
Clark said in a statement: “The government has worked tirelessly with British Steel, its owner Greybull Capital, and lenders to explore all potential options to secure a solution for British Steel.
“We have shown our willingness to act, having already provided the company with a £120 million bridging facility to enable it to meet its emissions trading compliance costs.
““This will be a deeply worrying time for the thousands of dedicated British Steel workers, those in the supply chain and local communities”
“The government can only act within the law, which requires any financial support to a steel company to be on a commercial basis.”
He added: “This will be a deeply worrying time for the thousands of dedicated British Steel workers, those in the supply chain and local communities.”
On Tuesday, a number of workers spoke out about the “depressing” feeling inside the plant, with others saying they felt “left in the dark” about their futures.
Contractor Callum Wright, a 30-year-old father of three, said: “I’m worried for my job.
“It’s depressing coming into work at the moment, the atmosphere is rubbish. We’re not really being informed about what’s going on.
He added: “I have children so I worry about providing for them, I haven’t got a clue what I’d go and do next. The uncertainty is really frustrating.”
Clark said he will be working with trade unions, local communities and workers in the supply chain, as well as the Official Receiver (OR) and a British Steel support group of management, to secure the futures of the Scunthorpe, Skinningrove, and Teesside sites.
Assurances have been given by the OR that British Steel will continue to trade, and that staff have been paid and will keep their jobs.
British Steel’s owner Greybull Capital said on Wednesday it had worked hard to keep Britain’s second largest steel producer alive but that the challenges of Brexit had proven insurmountable.
Roy Rickhuss, the general secretary of the Community trade union said the news will add more worry to workers and those connected with British Steel.
But he added that it will “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.”
Almost 5,000 workers are employed by Britain’s second-largest steelmaker, mainly in Scunthorpe, with another 20,000 employed by firms in the supply chain.
Redcar MP, Anna Turley, tweeted: “This is absolutely gutting. So many people have given everything to try & make British Steel a success.
“My thoughts are with everyone at the Beam Mill, Skinningrove & Scunthorpe today. Trying to get more info on implications & next steps.”
Labour leader Jeremy Corbyn previously urged the Government to nationalise the firm if a deal could not be reached to avoid the firm collapsing into administration.
Tim Roache, GMB general secretary, said: “This is devastating news for the thousands of workers in Scunthorpe and across the UK.
“Consecutive UK governments have failed to protect our proud steel heritage, and now this Prime Minister is overseeing its demise.
“Ministers should have been ready to make use of all the options - including nationalisation - in order to save British Steel.”
Shadow Business Secretary Rebecca Long-Bailey tweeted: “This is absolutely devastating news for the 1000s of workers, their families and the communities in Scunthorpe and Teesside and those throughout the supply chain.
“The Tories legacy will once again be industrial decline whilst they endlessly squabble over the European Union.”
Overall, more than 150,000 UK steel jobs have been lost since the 1980s, according to a new study by the GMB union, representing workers in the industrial sector.
In 1981 the industry employed 186,000 workers but the total has now slumped to around 32,000.
The GMB said Yorkshire and the Humber has suffered the most job losses – 40,000 -followed by the West Midlands with 25,800.
GMB national officer Ross Murdoch said: “The decline of the UK’s steel industry is devastating to see.
“Consecutive UK governments have failed to protect our proud steel heritage, and now Theresa May is overseeing its demise.”
Unite assistant general secretary Steve Turner said: “We are clear that the Government must now step up and step in and bring British Steel into public ownership until a buyer can be found to avoid an economic and industrial catastrophe.
He 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.
“To do so would be a betrayal of a loyal workforce that has made great sacrifices to make British Steel a success and send economic shockwaves throughout the steel industry, UK manufacturing and the households of 20,000 workers in the supply chain who rely on the steelmaker for their livelihoods.”