FEARS of collapse at a struggling steel plant employing dozens of local workers have been heightened after a winding up petition was issued by HMRC.

Speciality Steel at Stocksbridge, a division of Liberty Steel, has been issued the petition which could see it face closure if the firm is deemed to be insolvent in a court hearing - scheduled for next month.

Gupta Family Group (GFG) Alliance, Liberty Steel’s parent company, has been under investigation by the Serious Fraud Office since May for its financial arrangements.

GFG owner Sanjeev Gupta had a bail-out request for £170m rejected by the government last year due to the company’s accounting procedures - which a meeting of the Business, Energy and Industrial Strategy (BEIS) Committee in July found involved ‘risky’ loans based on unconfirmed future transactions.

But due to refinancing debts at its Australian steel and mining sites, a lifeline came late last year when GFG Alliance freed up £50m cash to be put into its UK plants at Stocksbridge and Rotherham, which employ nearly 1,000 workers.

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Penistone and Stocksbridge MP Miriam Cates said she had ‘pressed’ the government to support Speciality Steels should it go into administration.

“The news that HMRC is issuing winding up orders on Liberty Steel is very concerning for those working at Stocksbridge Speciality Steels, and for our entire community,” she said.

“Steel is a vital part of our local economy, and I'm determined to do all I can to secure its future.

“The official notices from HMRC haven't yet been published, but I've already spoken to local managers in Stocksbridge, the Minister for Steel and to the Department for Business, Energy and Industrial Strategy about the process and how I can support them going forward.

“In my conversation with the Steel Minister, Lee Rowley MP, I pressed for him to give assurances that, if Speciality Steels were to be forced into administration, the government will step in to help find a buyer, ensure a smooth transition, and enable the continuation of operations.

“I will be meeting with the Secretary of State again to discuss the situation and what actions the government can take to help secure jobs and the future of the industry.

“And I will continue to speak to management and unions to offer whatever support I can to employees locally.”

In May, GFG announced plans to sell its Stocksbridge site after main financial backer Greensill Capital collapsed into administration two months earlier.

The aerospace industry is a major customer of the plant and the distress in that industry, a knock-on effect of the Covid-19 pandemic, saw demand for its steel plummet.

John Healey, MP for Wentworth and Dearne, said he had ‘serious concerns’.

“I plan to hold the company to their pledge that this announcement will have 'no immediate impact on our businesses or employees',” he said.

“I will continue to work with other steel MPs to meet with ministers about the government action needed to support our UK steel industry.”

A spokesperson for GFG Alliance said: “We are committed to repaying all our creditors and continue to work with all stakeholders around the UK to create a sustainable future for our businesses following the collapse of Greensill Capital.”

Community, Unite and GMB unions, who represent the steel industry, said in a joint statement: "This action by HMRC threatens thousands of jobs and is a devastating blow to our members and their families.

“Liberty Steel is a strategically important business, crucial to delivering net zero, and under no circumstances can our plants be allowed to close.”