The UK’s third-largest steelworks has been placed under government control, creating an uncertain future for nearly 1,500 workers in Rotherham and Sheffield.

Insolvency courts granted a compulsory winding up order sought by creditors owed hundreds of millions of pounds by Speciality Steels UK (SSUK) – part of the Liberty Steel metals empire of controversial tycoon Sanjeev Gupta.

The company will now be placed in the hands of the Official Receiver and special managers from consultancy firm Teneo, which has been appointed to run it on behalf of the liquidator.

The government has agreed to cover the ongoing wages and costs of the plant while a buyer for is sought.

Liberty Steel said the decision to put the firm into compulsory liquidation was “irrational”.

Chief transformation officer Jeffrey Kabel said the move would “impose prolonged uncertainty and significant costs on UK taxpayers for settlements and related expenses, despite the availability of a commercial solution”.

Lawyers for Mr Gupta had applied for a four-week adjournment to allow time to place the company in a “pre-pack administration”, which allows an insolvent company to sell its assets to a bidder.

He wanted funding from investment giant BlackRock and Fidera, which invests in distressed companies, to buy back the business.

Winding up the company, his lawyers argued, could place the business in “free fall” and incur significant disruption, cost and risk to a nationally important steel company and its 1,500 workers.

The judge found the company was “hopelessly insolvent” with £600,000 in the bank, a monthly wage bill of £3.7m, supported by a parent group that has 15 entities in insolvency proceedings across nine jurisdictions.