BRITISH Steel has been saved in a rescue deal by Chinese firm Jingye - saving up to 4,000 jobs, the Insolvency Service has confirmed.

The move could save 4,000 UK jobs, including 800 on Teesside - but the group has reportedly said it will have to cut costs.

Jingye said it hoped to create 'a world class steelmaking group with global scale and ambition' and preserve thousands of jobs.

Jingye Group Chairman Li Ganpo, said: “As a young company with large ambitions we have long admired British Steel and appreciate its illustrious heritage. We share with the thousands of British Steel workers a passion for this industry and we are determined that together we can transform this business.”

He said his group would invest £1.2bn in the business over the next decade in upgrading the plants and machinery, making it more sustainable, and identifying new markets and products.

British Steel assets including the Scunthorpe steelworks, the Teesside Beam Mill and Skinningrove works, and subsidiary companies, will be acquired subject to regulatory approvals.

Jingye is expected to ramp up production at the Scunthorpe plant from 2.5m tonnes of steel a year to three million.

The government has been running the firm at a loss since it went into liquidation in May this year.

Mr Li added: “This is the beginning of a long journey. We know that this is only the start of the hard work of revitalizing British Steel. But we believe that this combination will create a powerful, profitable and sustainable business that will ensure the long-term future of thousands of jobs while producing the innovative high-quality steel products that the world needs.”

British Steel employs about 800 people at its sites in Teesside, including at Skinningrove and Lackenby.

In a statement, the Insolvency Service said: "The Official Receiver... can confirm that a sales contract has been entered into with Jingye Steel (UK) Ltd and Jingye Steel (UK) Holding Ltd (together, Jingye), to acquire the business and assets of British Steel Limited (BSL), including the steelworks at Scunthorpe, UK mills and shares of FN Steel BV, British Steel France Rail SAS and TSP Engineering.

"The sale also includes the shares owned by BSL in Redcar Bulk Terminal Limited.

"Completion of the contract is conditional on a number of matters, including gaining the necessary regulatory approvals. The parties are working together to conclude a sale as soon as reasonably practicable.

"The business will continue to trade as normal during the period between exchange and completion. Support from employees, suppliers and customers since the liquidation has been a critical factor in achieving this outcome."

The firm will be able to use a £30m government-funded support package following its purchase of British Steel, earlier reports suggested.

GMB national officer Ross Murdoch said: "We were impressed with the passion and enthusiasm from the Jingye team. However due diligence on this sale was completed very quickly and the devil will be in the detail.

"As such we will seek an urgent meeting with the Jingye group to discuss their precise strategy.

"GMB's position is, the new owner takes on the whole workforce on existing terms."

Turkish fund Ataer, previously in exclusive talks to acquire the company, was said to have fallen to third place in the bidding, also behind steel baron Sanjeev Gupta, who owns the UK-based Liberty House group.

Speaking before the confirmation of the deal, Labour and Co-operative candidate for Redcar, Anna Turley, said: “This is very positive news. When I met the Chairman of the Jingye Group last month the scale of their ambition for the company was very clear. They see a very strong future for British Steel and its workforce, and they were determined to increase production and grow the business. I was impressed with their determination and their vision.

“We wait to see all the details of their bid but this is a positive sign and a real statement of confidence in the company and the workforce. Thank you to everyone who has worked so hard in this uncertain period to keep the business going.”

Tees Valley Mayor Ben Houchen said: “After many months of uncertainty and worry about the future of British Steel, today’s announcement that a deal has been done and Teesside jobs have been protected and secured is wonderful.

“I’m delighted for all of those who work at British Steel who now know that their job is secure. I couldn’t imagine a better early Christmas present for all of those workers who have had to deal with the uncertainty.

“What’s even more exciting is that the new owners have pledged to increase production and following my meeting with the new owner last week, I’m confident the future is bright for British Steel.

“It’s been humbling to work with British Steel, Government and the unions to secure this deal and it shows what we can do when we pull together.”

Exchequer secretary and Conservative candidate for Middlesbrough South and East Cleveland Simon Clarke said this morning: “British Steel is more than just another company – the jobs and identity it provides around Skinningrove and Lackenby means it’s one of the main anchors of our community. I am absolutely delighted that Jingye have moved in so swiftly to secure this purchase and it lifts the cloud of uncertainty that’s been hanging over people’s lives for much of this year.

“As members of the British Steel Taskforce, Ben Houchen and I have been absolutely focused on securing a good future for the company and have held meetings with the company, the unions and the workforce. We’ve emphasised to the Government how much this matters and it’s great that they have stepped up with the necessary package of support to make this purchase possible – and kept the business running over the last six months.

“The Teesside divisions are some of the most sophisticated steelmakers in the world and it’s hugely welcome that we now have a purchaser who’s committed to taking them forward and growing the business.”