British Steel has entered the insolvency process, jeopardizing 5,000 U.K. jobs and endangering a further 20,000 in the supply chain.
EY has reportedly been appointed as special manager by the British government's Official Receiver, after a breakdown in rescue talks between the government and the company's owner, Greybull Capital.
"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," an official spokesperson said in a statement Wednesday.
Greybull, which specializes in trying to turn around distressed businesses, paid former British Steel owners Tata Steel a nominal £1 in 2016 for the U.K.'s second largest steel producer.
British Steel had requested a £75 million government loan but has since cut the figure to £30 million after Greybull agreed to inject more money, according to Reuters.
The company's troubles have been linked to declining orders from European customers due to uncertainty over the U.K.'s departure from the European Union, along with the weakness of sterling and the escalating U.S.-China trade war. Cheap Chinese steel has long weighed on demand for the company's product.
About 3,000 of the firm's employees are based in Scunthorpe, northern England, with its flagship plan supplying 95% of rails to Network Rail, which manages most of Britain's railway network.
Greg Clark, Secretary of State for Business, said this will be a "deeply worrying time for the thousands of dedicated British Steel workers, those in the supply chain and local communities."
"In the days and weeks ahead, I will be working with the Official Receiver and a British Steel support group of management, trade unions, companies in the supply chain and local communities, to pursue remorselessly every possible step to secure the future of the valuable operations in sites at Scunthorpe, Skinningrove and on Teesside," he added.
Tim Roache, general secretary of steelworkers' union GMB, said the news was "devastating" for the thousands of workers in Scunthorpe and beyond and criticized the government's handling of the crisis.
"Ministers should have been ready to make use of all the options – including nationalisation – in order to save British Steel but they either don't care or wouldn't take off their ideological blinkers to save hard working people and communities," said Roache.
He demanded urgent reassurances on what the future holds for British steelworkers and their families.