Labour leader Jeremy Corbyn said: "Britain's proud steel industry has a major role to play in ushering in a Green Industrial Revolution, securing British manufacturing for a sustainable, green future".
In a statement, the Official Receiver who oversees company administrations, said staff at the liquidated company would continue to be employed, and the firm would continue to trade and supply customers for now.
"The government has worked tirelessly with British Steel, its owner Greybull Capital, and lenders to explore all potential options to secure a solution for British Steel", said Business Secretary Greg Clark.
United Kingdom steel production has reduced dramatically in recent decades, with the number employed in the industry falling from 322,800 in 1971 to 31,800 in 2018, according to the Office for National Statistics.
Today Network Rail said: "We have been working closely with British Steel and colleagues across government for many weeks".
The Government said it would leave "no stone unturned" in its support for the steel industry.
"The [company's] cash was not big enough to sustain even one bank pulling the plug", he said.
Managing partner of Greybull Capital Marc Meyohas (R) shakes hands with Bimlendra Jha, chief executive of Tata Steel UK (L), at the newly-branded British Steel steelworks plant in Scunthorpe on June 1, 2016.
"The £30m bail-out it required from the Government was relatively small change compared to the large amounts the Treasury has had to pay out to support other struggling businesses in recent years".
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Making steel profitably is particularly hard in Britain, where steelmakers pay some of the highest green taxes and energy costs in the world and are saddled with high labor costs and business rates.
The crisis underscores the anxieties of British manufacturers, who have been demanding clarity around plans for Britain's departure from the EU.
The other companies within the British Steel group are continuing to trade as normal and are not in insolvency.
Mr Jeff Kabel, chairman emeritus of the International Steel Trade Association (ISTA), said the government was paralysed by Brexit and unable to address the steel sector's challenges.
GMB national officer Ross Murdoch said: "The decline of the UK's steel industry is devastating to see".
As the House will recall, I made a statement on 1 May, setting out details of a bridging facility that the government agreed to provide to ensure that British Steel was able to meet its obligations under the EU Emissions Trading Scheme (ETS) which fell due on 30 April.
Britain's Conservative government says propping a company up "goes against the party's free-market ethos unless absolutely unavoidable". British Steel had banked on using 2019 permits to cover its scheme commitments for 2018.
The firm's uncertain future leaves 5,000 jobs at risk plus a further 20,000 in the supply chain. "However, the additional blows dealt by Brexit-related issues have proven insurmountable".
"Greybull could walk out with millions because they secured all their loans against the assets".
Unions demanded the government give British Steel the loan.