UPDATE 1-British Steel situation is "very difficult" - environment minister

The situation at British Steel, which is on the brink of collapse unless the government agrees to provide an emergency 30 million pound ($38 million) loan, is "very difficult", Britain's environment minister said on Wednesday.

"The situation with British Steel is very difficult," Michael Gove told BBC radio. "I'm afraid I cannot pre-empt what the business secretary may say later," he said. British Steel, the country's second-largest steel producer, employs around 5,000 people, mostly in Scunthorpe, in the north of England, while 20,000 more depend on its supply chain.

It is owned by investment firm Greybull Capital, which specialises in trying to turn around distressed businesses, and paid former owners Tata Steel a nominal one pound in 2016 for the loss-making company. British Steel had asked the government for a 75 million pound loan but has since reduced its demand to 30 million pounds after Greybull agreed to put up more money, according to a source who is close to the negotiations.

Without government support, administrators EY could be appointed as early as Wednesday, the source told Reuters on Tuesday. Greybull declined to comment.