British Steel is on the verge of administration as it continues to lobby for government backing, sources say.
The UK’s second-biggest steel maker had been trying to secure £75m in financial support to help it to address “Brexit-related issues”.
If the firm does not get the cash it would put 5,000 jobs at risk and endanger 20,000 in the supply chain.
The government said it would leave “no stone unturned” in its support for the steel industry.
British Steel’s main plant is at Scunthorpe, but it also has a site in Teesside.
Company sources said that the direction of talks with the government would become clearer in the coming hours.
Speaking in the House of Commons, Business Minister Andrew Stephenson said: “I can reassure the House that, subject to strict legal bounds, the government will leave no stone unturned in its support for the steel industry.”
UK Steel’s director general, Gareth Stace, said: “The statement from the business minister today provided a glimmer of hope for the Scunthorpe site.
“This does provide some breathing space for the company, its employees, and the wider steel sector, providing a potential route towards a stable and sustainable future.”
The request for emergency financial support from the government is understood to have been reduced from £75m to about £30m.
In April, British Steel borrowed £100m from the government to enable it to pay an EU carbon bill, so it could avoid a steep fine.
Reports have said that British Steel shareholder Greybull Capital and lenders have agreed to pump new money into the firm.
However, unless a deal is reached by Tuesday afternoon, the firm could go into administration within 48 hours. EY would be expected to be appointed as administrators on Wednesday.
If a company goes into administration, then the insolvency practitioners appointed to run the business will try to rescue it by selling it, or parts of it, as a going concern.
But if that is not possible it will be liquidated, meaning that it will be closed down and its saleable assets will be sold.
Tough decision for the government
Sources close to Greybull Capital say its lenders have told them that unless they can secure a £30m lifeline they will pull the plug on British Steel tomorrow.
The timing of this could hardly be worse for the government coming as it does right before the European elections.
Cynics might suggest that Greybull is not unhappy with the timescale of the plea.
Business Secretary Greg Clark has a very tough decision, as I’ve already written.
The question may be whether the government can put this down to Brexit mitigation and tap the same source of contingency funds Chris Grayling disastrously used to procure emergency ferry capacity.
At least there would be an immediate dividend – to stave off the collapse of a firm that employs 4,500 people directly and has 20,000 more at risk in the supply chain.
However, having already lent £100m to cover a genuinely Brexit-related carbon emissions bill – further assistance to a private company struggling in a deeply challenged industry may be a precedent they would rather not set.