A major supplier to Britain’s third-biggest steel producer has been forced to call in administrators, deepening the financial gloom engulfing the industry.

Sky News has learnt that Aartee Bright Bar, which is based in the West Midlands and employs 250 people, has this week drafted in Alvarez & Marsal to handle an insolvency process.

Aartee is a supplier of engineering steel products to Liberty Steel, which is part of the industrial conglomerate headed by Sanjeev Gupta.

Mr Gupta is reported to have close ties to Ravi Trehan, Aartee’s founder, while Greensill Capital, the controversial supply chain finance group which itself collapsed in 2021, is said to have financed a number of trades between the two.

Michael Magnay, Joint Administrator at A&M, said in a statement issued to Sky News: “Like many businesses in its sector, Aartree Bright Bar has been facing significant headwinds as a result of the challenging economic environment and fluctuating steel prices.

“Against this backdrop, Administrators have been appointed and we are exploring the options available to preserve value.”

A steel industry source said on Tuesday that Liberty Steel would be an obvious buyer of Aartee Bright Bar’s assets out of administration.

A spokesman for Liberty Steel declined to comment, although a source close to it said it would “look at how it could help”.

Aartee, which also has offices in Lancashire and Wales, is a manufacturer, stockist and distributor of steel products.

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Its insolvency comes amid talks between the government and Liberty Steel’s two larger competitors – Tata Steel and British Steel – about £600m of taxpayer funding to aid their transition to greener electric arc furnaces.

The funding for British Steel has been thrown into doubt by its Chinese owner’s plan to axe about 800 jobs, mainly at its Scunthorpe plant.

Mr Gupta has also announced proposals to cut hundreds of jobs across his UK operations.

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