Clegg to see steel firm bosses after £80m blow

Mr Clegg, who represents the Sheffield Hallam constituency, has faced stinging criticism from Labour MPs after the axing of the loan, which was agreed by Labour weeks before the general election and would have helped the company become a world leader in manufacturing components for nuclear power stations.

Under more pressure from MPs yesterday, Mr Clegg insisted the company was an "outstanding" firm but only sought the public funding because "they felt the terms they were receiving from banks were not good enough and because they did not want to dilute their own shareholdings in the company".

He told MPs: "Do I think it is the role of Government to help out owners of companies who do not want to dilute their own shareholdings? No, I do not. Every Member of this House could identify companies that are struggling more than Sheffield Forgemasters and that would also like to receive a Government loan."

Mr Clegg, who will meet the company chairman and chief executive, has sought to defend his role by saying it would be an "abuse of power" to have intervened.

But last night Labour's Pat McFadden, the Shadow Business Secretary, said: "We protected the taxpayer interest by making this a loan and ensuring the taxpayer would share in the proceeds of any sale of the company.

"It's not true to say that they would be no dilution of directors shareholding because they had to also get outside investment to make the deal work.

"What all of this points to is Government Ministers now casting around for reasons to justify a bad industrial decision."