Corus has already earmarked £40m to pay off thousands of workers if its Redcar plant closes, it has emerged.

The news raised fears that steelmaking on Teesside could be dead by 2007.

In a statement, the Anglo-Dutch manufacturer issued a veiled threat that Teesside would 'need to demonstrate its ability to survive as a stand-alone cash generative steel slab producer'.

It added that a decision on its future could be made as early as the end of 2006.

The fact that a redundancy 'pot' has been set aside in case the local works failed to succeed was seen as a worrying development on Wednesday.

The announcement threatened to destroy a partnership between bosses on Teesside and the unions that, up until now, had worked together to secure a future for steelmaking in the region.

Mick Mannion, Corus worker and Iron and Steel Trades Confederation representative, said: "I thought, and perhaps I am wrong, we were doing this thing together and it was about partnership."

Co-operation between Redcar plant bosses and the unions was heralded earlier this year as an unprecedented step.

The two sides joined forces after Corus announced in April that its northern arm, renamed Teesside Cast Products, would stop supplying the company and would compete on the international market by the end of 2006.

Mr Mannion has fired off an angry letter to David Stewart, director of human resources at Corus Construction and Industrial, demanding to know why the statement was made. "We were not consulted about this," said Mr Mannion. "I need an explanation and I need an explanation I can live with. If there is a good valid reason for it, let them tell us."