Industry: Ministers attacked for axed loan as steel firm ends plan

Labour attacked the coalition's "shameful" handling of the case after the steelmaker said there was no viable private funding for the project, which would have made it a world leader in manufacturing components for new nuclear power stations.

And Deputy Prime Minister Nick Clegg found himself under further pressure as Commons Speaker John Bercow was asked to investigate whether he had misled MPs by suggesting the company had only needed Government help because the owners were not willing to dilute their control of the company.

Labour leadership contender Ed Miliband accused the Government of "ineptitude" and said an independent panel should investigate and decide whether the loan should be re-instated.

"This Government's mishandling of the decision to withdraw a loan promised to Forgemasters has been appalling," said Mr Miliband, MP for Doncaster North.

"They have made an unwise decision worse by their utter ignorance about what is actually going on inside the company."

The decision to stop work on the 15,000-tonne press, one of the world's largest, comes only weeks after Ministers announced they were pulling the 80m loan pledged by Labour before the election.

The Forgemasters board met senior Government officials and financial advisers last week to consider alternative sources of funding.

"The conclusion of the board and financial advisors from these discussions was that, without support along the lines of the withdrawn conditional loan offer, there is no easily available private sector alternative funding structure which is both economically viable for the company and fair to existing shareholders," the company said.

Sheffield Brightside and Hillsborough MP David Blunkett

said: "Forgemasters offered to give up 40 per cent of their holding but any more than this would have simply meant that the company no longer existed – and in any case, would have opened them up to a Japanese takeover."

Shadow Business Secretary Pat McFadden claimed that the company had "run out of patience and is now shelving discussions with the Government".

But Business Secretary Vince Cable said: "I will keep the situation under review and reconvene the meeting of experts with the Sheffield Forgemasters Board when they are ready, to review the investment potential with the company."

Mr Clegg accused Labour of making a "cynical promise of a loan that it knew it couldn't afford".