The UK government has reportedly turned down a request for £170m ($234.5m) in emergency funding from Liberty Steel, in a move that could see the firm go under.
Multiple outlets, including the BBC, The Times and the Financial Times reported the move on Sunday, however the government did not confirm or deny those reports when approached by Yahoo Finance UK.
The move would put 5,000 jobs at risk at 12 sites around the UK, including in Rotherham, Motherwell and Newport.
A key financial backer to Liberty's parent company GFG, Greensill Capital, filed for insolvency earlier this month.
Greensill had advanced hundreds of millions of pounds to firms linked to Sanjeev Gupta's using a state-backed coronavirus lending scheme, the Financial Times said.
Gupta's GFG Alliance said on Saturday that the bailout was necessary to pay day-to-day operating costs and absorb recent losses, in a letter to the Department of Business, Energy and Industrial Strategy (BEIS).
The government has been locked in discussions with Liberty Steel. Business secretary Kwasi Kwarteng has met with company bosses and trade unions on several occasions over the crisis at the group.
On Wednesday, Kwarteng tweeted he "held another constructive meeting" with Community Union, GMB and Unite, which represent Liberty Steel workers. "I am monitoring the situation very closely and remain fully committed to supporting a competitive and sustainable future for Britain’s steel industry," he said.
Trade unions have been urging the government to consider nationalising Liberty Steel in effort to save thousands of jobs.
Unite Union on Saturday called on the government to do "everything that is necessary in order to preserve Liberty Steel and secure its long-term future."
Unite’s assistant general secretary Steve Turner said that steel was a "foundation industry and was essential for the recovery" of the UK economy from COVID-19.
A government spokesperson said: “The government is closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions.
“The government has supported the steel sector extensively, including providing over £500m in recent years to help with the costs of energy. Our unprecedented package of COVID support is still available to the sector to protect jobs and ensure that producers have the right support during this challenging time.”
GFG Alliance declined to comment on its dealings with the government, but said it is "operationally strong" and "benefiting from strong markets in steel, aluminium and iron ore."
"While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs. Discussions to secure alternative long-term funding continue to make good progress and while this takes place we have asked all of our businesses to manage cash carefully. Combined with the efficiency drive we’ve implemented over the past year this has ensured that most of our major businesses generating positive cashflows."
The firm added that in the UK speciality steel business, where weakness in the aerospace market has cut demand for some products by 60%, it has been taking specific actions to stabilise the business and improve cash flow.
"Self-help activities on the sites include reducing steel stocks, matching stock to customer orders, and working with customers to achieve terms that will bring in cash as early as possible," it said.
Watch: The Rise and Fall of Greensill