The Government has loaned £120 million to British Steel so it can meet its EU emissions trading obligations, according to the Business Secretary.

The company, which employs 4,200 people in the UK and is the country's second-biggest steelmaker, faced being left with £600 million in liabilities to the EU if the Government had not stepped in.

TSP Engineering, in Workington, is a wholly owned independent subsidiary of British Steel.

Mr Clark told MPs in the House of Commons that the Government's decision to enter into a short term bridge facility valued at around £120 million was a unique one in exceptional circumstances.

He added: "While this was an unenviable situation to face, the Government believes that the agreement reached with British Steel to ensure that it could comply with its legal obligations represents a responsible course of action."

Labour welcomed the move but said early warnings from industry bodies were not adhered to and the Government's handling of the Brexit process was to blame for the situation.

Under the EU emissions trading system (ETS) heavy industry and power producers are required to offset their carbon emissions above a certain level through purchasing allowances.

In December 2018, the European Commission suspended the UK's ability to auction ETS allowances until the Withdrawal Agreement was ratified.

The Government has now purchased the necessary emission allowances on behalf of British Steel enabling it to comply with its 2018 EU ETS obligations in full.

Mr Clark also said: "If it had failed to do so (comply) by last night's deadline, it would have attracted an immediate and unremovable fine of half a billion pounds on top of the continuing liability of around £120 million, putting the company under significant financial strain.

"The Government was therefore left with a choice – either see British Steel be unable to comply with their legally binding obligations, creating a liability of over £600 million, or consider whether there was a path to allow them to comply within the strict bounds of what is possible under domestic European law.

"After careful consideration, the Government took the decision to enter into a short-term bridge facility valued at around £120 million."

Shadow business secretary Rebecca Long-Bailey said it was regrettable that the Government's handling of the Brexit negotiations had brought us to this point.

She added: "The Government had been warned about the uncertainty over the EU ETS for over two years and the Prime Minster's threats of a no deal Brexit of over two years caused significant uncertainty for the steel sector.

"UK Steel, the body representing the sector, warned in January that a no-deal Brexit was nothing short of a disaster for the sector, but despite the warnings, the Prime Minister ploughed on and the risks and viability of our manufacturing sector have been plain to see."

Ownership of the company's 2019 allowances will now be transferred to the Government once they are released. Through the subsequent sale of these 2019 allowances, Mr Clark said he expects the taxpayer "to be repaid in full".

Alan Brown, the SNP's infrastructure spokesman, asked why the decision to offer a loan to British Steel was "taken to the 11th hour" adding that it was "almost a gamble".

Mr Clark said the Government had taken action to "deal with an unusual and urgent problem and done so in a way that has displayed some agility".