Labour must seek a new buyer after exclusive negotiations with Norwegian bidder break down
The future of 1,500 steelworkers has been thrown back into doubt after exclusive negotiations to rescue one of Britain's largest steel producers collapsed.
Talks between Government officials and Norwegian company Blastr over the acquisition of Speciality Steel UK (SSUK) ended after the firm's preferred bidder status expired without an agreement being reached.
The South Yorkshire steelmaker, which operates sites in Rotherham and Sheffield, had appeared to be edging closer to a sale earlier this year.
However, the breakdown in negotiations means ministers and officials must resume efforts to find an alternative buyer for Britain's third-largest steel business.
An Insolvency Service spokesman said: "A period of exclusivity was entered into with a preferred bidder, and we now continue to pursue the sales process."
The Government assumed control of SSUK in August last year after metals tycoon Sanjeev Gupta faced a winding-up order from creditors who were owed hundreds of millions of pounds.
Responsibility for finding a new owner for the business subsequently passed to the official receiver.
Blastr, a Norwegian start-up that has yet to begin production at its first facility in Finland, was granted preferred bidder status in April.
The designation gave the company an initial five-week exclusivity period to finalise a transaction.
That window was later extended, although discussions ultimately failed to result in a deal.
Despite losing its exclusive position, Blastr is understood to remain involved in the sales process.
Sources close to the company said negotiations with the official receiver are continuing and contracts could still be exchanged within weeks.
The end of Blastr's exclusivity may also create an opportunity for Czech billionaire Pavel Tykac, whose investment vehicle Sev.en Global Investments had previously been viewed as the Norwegian firm's main rival for SSUK.
Sev.en recently announced plans to invest £100 million in its Cardiff steelworks, underlining its interest in expanding its footprint within the UK steel industry.
A spokesman for Sev.en Global Investments said: "The UK Government has rightly backed the industry through its Steel Strategy, and to fulfil this strategy it is vital to find the right partners for British Steel and Speciality Steel to operate these strategic assets.
"Sev.en Global Investments has the proven steelmaking experience, and the vision and financial firepower to back it."
One challenge facing the Czech group could be proposals reportedly favoured by senior Government officials to merge Gupta's former steel business with state-controlled British Steel.
The uncertainty surrounding SSUK comes as the wider steel industry prepares for significant changes to import tariffs that are due to come into force at the start of next month.
Business Secretary Peter Kyle has supported the measures, which will double import taxes on some steel grades and reduce tariff-free quotas by half.
Mr Kyle said the reforms would help in "closing the decades-long chapter of destructive de-industrialisation and committing instead to strengthening and sustaining Britain as a steelmaking nation".
Primary steel producers, including British Steel and Tata Steel, have welcomed the revised tariff regime.
However, downstream manufacturers that process semi-finished steel into finished products have raised concerns, challenging the Government's assertion that the protections only apply to grades already produced domestically.
Liam Byrne, chairman of the Commons business and trade committee, warned last month that the planned tariff changes could threaten Britain's ability to manufacture warships and nuclear submarines while also putting the aerospace and Formula One sectors at risk.
A spokesperson for the Insolvency Service said: "The period of exclusivity came to an end, as expected, and we continue to engage with the preferred bidder.
"Continued speculation regarding the future of the site is unhelpful, not least to the employees, as the Official Receiver continues to pursue a successful sale."