The government has ruled out offering financial support to Harland and Wolff because of “a very substantial risk that taxpayer money would be lost”.
In a statement released on Monday, Labour business secretary Jonathan Reynolds said that following a review, the government has decided against providing a guarantee to bail out the ailing shipyard.
The company, which is part of a consortium that landed a major contract to build new Royal Navy ships, had applied for a £200 million loan guarantee from the government as part of efforts to restructure its finances.
In the statement Mr Reynolds said: “While such a decision is not easy, it is my assessment, following extensive engagement by my officials with market players, that HM Government funding would not necessarily secure our objectives and there is a very substantial risk that taxpayer money would be lost.
“The government believes, in this instance, that the market is best placed to resolve the commercial matters faced by Harland and Wolff.”
Mr Reynolds emphasised that the government is committed to supporting UK shipbuilding.
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The Belfast-based shipyard company, famous for building the ill-fated Titanic, said on Friday that its application for a £200 million Export Development Guarantee had been rejected.
The company, which has substantial debts, is now discussing an emergency loan with its existing lender.
Harland and Wolff, whose twin cranes Samson and Goliath define the Belfast skyline, had been contracted to build three fleet ships for the Royal Navy as part of a £1.6bn contract.
It employs 1,500 employees across the UK, with 500 based in Belfast.
Last year, the shipyard delivered its first ship in 20 years as it was contracted to build 23 barges for a London-based waste management firm, Cory.
East Belfast MP, Gavin Robinson, told BBC News NI’s Good Morning Ulster that the contract still puts the shipyard in a much better place than it was just five years ago, when it went into administration.
Meanwhile Unite general secretary Sharon Graham said: “Harland & Wolff’s workforce and the shipyards they work in are of critical strategic importance.
“Five years after Unite members secured Harland and Wolff’s survival in Belfast, the political focus must now be on attracting stakeholders who are committed to building a long-term future, rather than those looking to turn a quick profit.
“I have been very clear with ministers that our union will leave no stone unturned to defend these vital assets and Unite has been engaging positively with senior government officials in order to ensure that this happens.”
Matt Roberts from the GMB union added: “These are worrying times for workers and their families in Northern Ireland, Scotland and the South West.
“These yards have been at the heart of UK manufacturing for centuries – from building the Titanic to the ships that defeated the Armada.
“Now they are critical to our future security in building the Fleet Solid Support ships for our navy and in providing the renewables infrastructure needed to reach net zero.
“These yards must be saved and their long-term sustainable future secured.”