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        Britain's second-largest steelmaker, British steel PLC, is on the verge of collapse unless the government agrees to extend an emergency 30 million pounds ($38 million) loan later Tuesday, sources familiar with the situation said.

It is owned by Greybull Capital, an investment firm, and employs about 5,000 people, most of them in scunthorpe, in the north of England, with up to 20,000 other jobs dependent on its supply chain.

        Greybull Capital, adept at turning around ailing businesses, paid tata steel a token 1 for the loss-making company in 2016 and renamed it British steel.

According to people close to the process, British steel had asked the British government for a 75 million loan, but Greybull has reduced its request to 30 million after agreeing to commit more money.

        If the loan is not approved by Tuesday afternoon, it could be possible to appoint ernst & young as the receiver of UK steel as early as Wednesday, the sources said.

"The UK steel industry is critical to our manufacturing base and strategically important to UK industry.The government has to intervene.Gill Furniss, a Labour spokesman.

A spokesman for the department for commerce declined to comment on details of British steel but said: "we are in regular dialogue with a number of companies."