THOUSANDS of North-East steel workers faced the spectre of redundancy last night after a last-ditch legal challenge by Corus came to nothing.

The company - created by the merger of British Steel and Dutch group Hoogovens - hoped to balance the books by raising £500m from selling its aluminium business to French firm Pechiney.

But that move was blocked by its own Dutch supervisory board. Yesterday, a bid from the British branch of the company to overturn that decision through the Dutch courts failed.

The news came only days after the company warned that drastic cuts were needed to reduce debt, leading to fears that its Teesside operation could be closed down.

With it would go more than 3,000 jobs across Redcar and Lackenby and up to 7,000 more on Teesside as supplier companies went to the wall.

Corus UK accepted the verdict as final but declined to comment further yesterday.

But in a statement earlier this week it said: "UK losses have got to be reversed and, given the economic outlook, this will inevitably lead to significant further capacity reductions and concentration of operations on to fewer sites."

Analysts have suggested Teesside is the most vulnerable plant. Teesside has only one furnace, which means it is not as flexible as Corus's other works at Scunthorpe and Port Talbot in Wales.

Union leaders have remained upbeat but were scathing about Corus's management. Mick Mannion, of the ISTC, said: "We firmly believe this situation can be turned round. However, there is a problem with the senior management whose credibility in The City and at the workplace is gone.

"The debt seems huge but you have to remember that Corus is a £10bn-a-year turnover business."

It was revealed yesterday that MPs are to investigate Corus's financial plight. Ashok Kumar, MP for Middlesbrough South and East Cleveland, said he had persuaded the trade and industry committee to hold an inquiry.