British Steel has been placed into insolvency, which could put thousands of jobs at risk.
Owners Greybull Capital had been seeking financial support from the government before the collapse, saying it faced a number of Brexit-related issues, plus threats from cheap steel from China.
But British Steel owners failed to secure the £30 million bailout they sought.
Tim Roache, the GMB union's general secretary, said: "This is devastating news for the thousands of workers in Scunthorpe and across the UK.
"Consecutive UK governments have failed to protect our proud steel heritage, and now this Prime Minister is overseeing its demise.
"Ministers should have been ready to make use of all the options - including nationalisation - in order to save British Steel."
MP Anna Turley, who represents the Redcar constituency in Teesside where a number of British Steel employees are based, tweeted: "This is absolutely gutting. So many people have given everything to try & make British Steel a success.
"My thoughts are with everyone at the Beam Mill, Skinningrove & Scunthorpe today. Trying to get more info on implications & next steps."
Speaking to talkRADIO's Mike Graham, chief economist and head of the Centre for Economic Justice Carys Roberts, said it was "bad news for Britain".
"We looked at the numbers yesterday and the collapse is estimated to result in 12,000 jobs lost," she said.
"The really important point here is that there is a lot at stake, there is the jobs and it is a really important indudstry if we're looking at the future of our economy."