Britain's second-largest steel producer is on the brink of collapse, UK news reports said on Tuesday (21 May).

According to Sky News, the development came amid growing signs that an emergency government loan would fail to materialise, putting around 25,000 jobs at British Steel at risk.

According to its website, the steelmaker's main automotive-related product is wire rod made at its main site in Scunthorpe, Lincolnshire.

Sky News said British Steel, its lenders and the government were preparing for an insolvency to take place within 48 hours, with EY expected to be formally appointed as administrators on Wednesday unless a deal was struck by Tuesday afternoon.

If last-minute talks fail to secure a solvent deal, British Steel's collapse could result in more than 4,000 redundancies at its giant Scunthorpe steelworks, job cuts at its other sites, and as many as 20,000 more jobs in its supply chain also jeopardised by the crisis, Sky News said.

Insiders told Sky News a request to the government for emergency financial support had been reduced from GBP75m to around GBP30m with British Steel's shareholder – Greybull Capital – and lenders agreeing to inject new money into the company.

Lenders were also understood to have released their security in order for a new government loan to be made on secured terms.

Sky News' sources said that, after days of brinkmanship between the different stakeholders, a compromise could yet be struck, although they conceded that such an outcome looked increasingly unlikely.

One said that British Steel's lenders and directors had resolved to place the company into administration on Wednesday if a final deadline for a deal on Tuesday afternoon was not met.