IT was definitely a marriage of convenience. But yesterday the merger of British Steel and Dutch metals group Koninklijke Hoogovens which formed Corus looked likely to be heading for the divorce courts.

The two sides were united in a £3.8bn merger in October 1999 but after Corus announced losses of £458m yesterday, relations were distinctly frosty.

The Dutch had signalled their intentions earlier this week when Corus hoped it could sell its two aluminium businesses to Pechiney, of France, so it could focus on its carbon steel operation.

But the Netherlands supervisory board ruled out the deal after objecting to proceeds being used to prop-up its loss-making UK business.

Corus chairman Sir Brian Moffat said yesterday the company was not looking to demerge the British and Dutch interests, but business analysts believe otherwise.

Stuart Fraser, investment director at Brewin Dolphin, said: "Relations between the board in the Netherlands and the board here have been fraught for some time.

"A parting of the ways is what the Dutch want and I should think it is what they will get."

While Sir Brian has been asked to stay on for continuity in the light of Tony Pedder's resignation as chief executive, questions remain as to whether he will have the trust of his Dutch board counterparts.

When the merger was announced in June 1999, it was hailed as a merger for growth, but Mr Fraser suspects there has been a clash of cultures, with the two sides favouring different ways of running the business.

Ultimately, the Dutch have probably felt the British were not doing enough to solve the UK problems and that they should have closed a plant much earlier.

With Corus owing £1.2bn in loans, one aspect is evident - they are at the mercy of the banks.

The demerger option could mean the Dutch side would have a management-led buy-out encouraged by venture capitalists, or the banks could sell that side to a trade buyer or float it.

As the Dutch have made clear, it is the British plants, whether at Teesside, Scunthorpe or Port Talbot, which will bear the brunt of any restructuring plans in the UK.

Professor John Wilson, director of the business school at Teesside University, said: "I don't think there is much scope for optimism other than potential intervention from outside the company, such as the Government.

"It has been in freefall for some years now and its share price has plummeted. Given the factors which have led to it being in this situation, I can't see how it can be turned around."