Whitehall has launched an investigation into the collapse of a North-East steelworks just weeks after it was taken over.

Government Chief Whip Hilary Armstrong will meet Department of Trade and Industry officials and union leaders in London today to discuss the financial crisis surrounding Weardale Steel.

Eastwood Industries went into administration only seven weeks after buying the 140-year-old company, based in Wolsingham, County Durham, for one pound.

The future now looks bleak for the company which helped build the Gateshead Angel of the North.

It has also emerged that one of the co-directors of Eastwood Industries - Adrian Taft - was a director of another company already in administration with debts of £155,457. Weardale Steel is now in the hands of administrators, who say that if a buyer is not found soon, it will have to be wound up.

Local MP Ms Armstrong said last night: "Securing jobs here in Weardale has to be top of the agenda."

Although the DTI refused to confirm or deny an investigation was under way, Ms Armstrong said: "DTI officials, both here and in London, have started investigating what has happened to a company which enjoys a worldwide reputation for its very specialised engineering skills."

Kenny Lally, an Amicus union shop steward at the works, said: "There has to be a full DTI investigation into how this has been allowed to happen. We also need to ensure that the works is saved from closure and jobs are protected."

A DTI spokesman confirmed that Adrian Taft was director of a Midlands transport company that went into administration in February - just months before the Weardale deal was completed.

According to Companies House records, Mr Taft was also a director of a second transport firm which went into voluntary liquidation in July, 2000.

His brother, Ian, who helped broker the deal, said they had merely arranged finance for the takeover by Tony Coade, who became managing director of Weardale Steel a few days later.

Mr Taft said: "That was our only input. It was a perfectly normal business transaction."

Mr Coade was yesterday unavailable for comment. All calls to him were referred to Sheffield administrators Poppleton and Appleby.

Meanwhile, Bill Cooper, former managing director at Weardale Steel for seven years, is consulting solicitors about taking legal action against Eastwood Industries for breach of contract and unfair dismissal.

Along with 54 of his workers, he is now unemployed. They have received no redundancy or holiday pay.

For 19 years, Weardale Steel was owned by Langham Industries, based in Dorset. Its chairman, John Langham, said that for some time they had been trying to set up a joint venture with another foundry company.

"After a lot of negotiating" they decided to sell Weardale Steel for "what amounted to a pittance", he said, because Eastwood Industries had promised to bring much-needed new contracts to Weardale.

The Northern Echo understands the company changed hands for a nominal fee, believed to be £1.