The UK’s third-largest steelworks has been placed under government control, creating an uncertain future for nearly 1,500 workers in Rotherham and Sheffield.

Insolvency courts granted a compulsory winding up order sought by creditors owed hundreds of millions of pounds by Speciality Steels UK (SSUK) – part of the Liberty Steel metals empire of controversial tycoon Sanjeev Gupta.

The company, which uses scrap metal to manufacture steel, will now be placed in the hands of the official receiver – a government appointed liquidator – and special managers from consultancy firm Teneo.

The government has agreed to cover the ongoing wages and costs of the plant while a buyer is sought.

Following the High Court decision on Thursday, Liberty Steel’s chief transformation officer Jeffrey Kabel told the BBC he was “really disappointed” as he thought they had “presented a very good case”.

“We are by far the best company to run this business. We’ve run it for 10 years. Put a lot of blood, sweat and a huge amount of money into it,” he said.

Lawyers for Mr Gupta had applied for a four-week adjournment for time to place the company in a “pre-pack administration”, which allows an insolvent company to sell its assets to a bidder.

He wanted funding from investment giant BlackRock and Fidera, which invests in distressed companies, to buy back the business.

Winding up the company, his lawyers argued, could place the business in “free fall” and incur significant disruption, cost and risk to a nationally important steel company and its staff.

The judge found the firm was “hopelessly insolvent” with £600,000 in the bank, a monthly wage bill of £3.7m, supported by a parent group that has 15 entities in insolvency proceedings across nine jurisdictions.

Lawyer for the creditors, Ryan Perkins, argued UK steel-making would be better served if the company’s assets were sold off with assistance from independent special managers acting on behalf of the government after it is wound up, rather than allowing administrators appointed by Mr Gupta to conduct the process.

Liberty Steel Group’s finances were upended when its main lender, Greensill Capital, collapsed owing billions to investors including UBS. Those investors are part of the creditor group that applied for the winding up petition.

Mr Gupta’s plan to place SSUK in administration then immediately buy it out again would have allowed the company to largely shed those debts.

Mr Kabel said the company was still hopeful it could buy SSUK back due to Blackrock and others “supporting us”.

In court, creditors highlighted how SSUK had not published financial statements since 2019 and its direct parent company, based in Singapore, was itself subject to insolvency proceedings.

The government will now be responsible for the operational and financial risks of the company, which has produced next to no steel for over a year.

A spokesperson for the government said that it remains “committed to a bright and sustainable future” for steelmaking in the UK.

In response to a question about British Steel in Scunthorpe, the first steel company the government seized control of in April, Education Secretary Bridget Phillipson said Labour wanted to ensure the UK kept “primary steel making capacity here”.

“That’s why the steel strategy alter on this year will set out the long term direction for the industry,” she said.

Speaking from outside the Sheffield site, mayor of South Yorkshire Oliver Coppard said it was “good news” the government had stepped in to take control and end the uncertainty for workers.

But he told the BBC the government’s next job is to ensure the steelworks now have “the brightest possible future”.

George Godber, fund manager at Polar Capital, said there was a “strategic imperative” to produce steel in the UK, particularly for the defence industry.

The court decision comes after the government took over day to day running of British Steel’s Scunthorpe plant in April to prevent its Chinese owners from closing its steel furnaces.

The entire industry has struggled with high energy prices, cheaper products from overseas and the blow to exports to the US caused by 25% tariffs imposed by the Trump administration.

Following Thursday’s court decision, the GMB union said it was “another tragedy for UK steel”.

Chris Williamson has worked at the Rotherham site for more than 25 years and is a union rep for Community union.

He told the BBC the special managers had already arrived on site, and said the court’s decision “puts a closure on things” but workers wanted “guarantees on pay and pensions”.

Mr Williamson said the Rotherham plant had not produced steel since July 2024, with most of the workers on a form of furlough, being paid 85% of their wages.

“We just want certainty and to start producing steel again”, he said.

With additional reporting from Pritti Mistry and Ollie Smith