A deal is close to being finalised that could see the struggling steel manufacturer British Steel brought out of insolvency.

British Steel, formerly Tata Steel, was put into compulsory liquidation in May after rescue talks with the Government broke down.

However, the Turkish Armed Forces Assistance Fund (Oyak) has said it plans to take over the steel manufacturers by the end of the year.

British Steel employs 5,000 people in total. It owns the Scunthorpe steel works where 3,000 people work and it employs another 800 on Teesside.

An estimated 20,000 jobs in the company’s supply chain were said to be at risk if British Steel had gone under.

Tees Valley Mayor Ben Houchen described the news of the deal as ‘fantastic’.

‘A potential buyer has now agreed terms to buy British Steel as whole and to run it as a business,’ he said.

‘They have now entered into an exclusive period to finalise legal documentation over the coming weeks, which will secure the long-term future of British Steel.

‘Since the day the business went into liquidation we’ve been working tirelessly behind the scenes with Government to get talks to this point and it’s a massive step forward for all parties that a deal is agreed.

‘While it’s not quite over the line yet, this will be a huge weight off the shoulders of local workers, their families and the supply chain.’

Cllr Rob Waltham, leader of North Lincolnshire Council, said: 'We are optimistic about the future of British steel. The fact that this has gone to the heads of terms means the preferred buyer has put their signature on a piece of paper that they are interested in buying the whole site in Scunthorpe and the businesses attached, which is positive. Moving forward they are going to need to make some firm commitments to investing in the site.

'The council will continue to be a main partner working with the government to support the workers. It matters to us because they are our family, friends and neighbours, it is important we are a key stakeholder.'

Business secretary Andrea Leadsom commented: ‘This is an important and positive step forward in securing the future of British Steel.’