Sirius Minerals confirmed that around 1,200 jobs at its Woodsmith site on North Yorkshire Moors would be at risk if it did not secure financing by March next year.
The firm said it could run out of cash by the end of the year if it did not secure the necessary funds to unlock a 2.5 billion-dollar (£2 billion) credit facility from JP Morgan.
After failing to secure the necessary funds, the London-listed business said the UK Government rejected an appeal for one billion dollars in bonds.
The funding would have "enabled the company's financing to be delivered as planned" for the potash project which would deliver hundreds of jobs, Sirius said.
The Government's response to the company's bond appeal prompted local Labour politicians to accuse it of "taking its eye off the ball". Middlesbrough's Labour MP Andy McDonald said of Tory Ministers: "They’re keen enough to give tax breaks to gambling bankers but won’t lift a finger to help our industries".
And the Northern Powerhouse Partnership, which represents business and civic leaders, said the current funding problems would have been avoided "had Theresa May’s administration been more committed to the Northern Powerhouse, and acted".
But Conservatives in North Yorkshire and the Tees Valley said they hoped the project could still be a success, with metro mayor Ben Houchen accusing Labour of "hyperbole and political point scoring" with a General Election approaching.
During a briefing for journalists, the Prime Minister’s spokesman told The Yorkshire Post: “I can't comment on this specific case, but we do, when examining any request for financing, have to assess the potential of a project against the need to protect taxpayers’ money. "
A Government spokesman later added that "all requests for financial support must meet necessary lending criteria".
Scarborough and Whitby MP Robert Goodwill, a former Tory Minister, told The Yorkshire Post the plans to continue development at the potash mine were "well on the way to production and unfortunately at this stage it is the funding that is the missing piece of the jigsaw."
He said: "Everyone is keeping their fingers crossed that the funding package can be put together and bring this project through."
The MP said that as well as creating jobs, the mine would benefit locals who had invested in the company. A charitable trust was set up to give money to local groups and Sirius was working with train operator Northern to lay on additional rail services.
He said: "I am disappointed they haven't got the funding package together. By scaling down the operation they are buying more time to get the funding they need, or maybe funding a partner who could come in to pair up with."
Denying the announcement had anything to do with Brexit, he said: "The market for their product would be global, there are no tariff implications. if anything the weak pound is making the UK a more attractive place to invest.
"Ultimately the Treasury has taken the view that this is a matter for the financial markets and it is not for the Treasury to step in."
Tees Valley metro Ben Houchen and Labour MP Anna Turley, representing Redcar, clashed on social media after Ms Turley wrote that: "Tory warm words about commitment to Teesside and a Northern Powerhouse are ringing hollow today."
Mr Houchen responded: "Can we not turn this into some election/Brexit proxy war. It’s a set back. It’s a difficult time but the project will be built & options are being looked at.
"Hyperbole and pathetic political points scoring does nothing for those working at the mine or those invested in the project."