British Steel is to be sold to the Chinese firm Jingye, the UK government has announced, in a deal that prevents the closure of the company’s Scunthorpe site and could safeguard 4,000 jobs.

Jingye and the government’s official receiver signed a sales contract on Monday, with a formal deal subject to regulatory approvals as well as consultations with employees over new job offers. The deal was worth about £50m, a person close to the talks said.

An announcement on the Insolvency Service’s website said Jingye’s new UK subsidiaries had agreed to “acquire the business and assets of British Steel Ltd”. As well as the main site in Scunthorpe, the contract also includes mills in Teesside and Skinningrove and subsidiaries in Workington, the Netherlands and France.

Jingye is planning to invest about £1.2bn in British Steel over the next decade, including upgrading, lowering emissions and improving energy efficiency.

In a statement, Jingye said it “anticipates making offers to as many employees across the business as possible”. A person with knowledge of Jingye’s plans said no guarantees could be given before the deal was formally closed.

Quick guide What went wrong at British Steel? Show Hide What plans does Jingye have for British Steel? Jingye's financial profile is relatively opaque, but the company is expected to pledge investment worth £1bn over the next decade. A person briefed on Jingye's thinking said the company wanted to preserve as many jobs as possible, but could not say how many of the company's 4,000 workers would keep their jobs. British Steel accounts for a third of UK production, so is seen as a key national asset in many quarters.

What went wrong at British Steel? When Greybull Capital bought British Steel in 2016 it promised great things. The private equity firm pledged to invest £400m and within months it was boasting of a return to profit and a bright future ahead. Three years later it collapsed. In a letter to staff, the British Steel chief executive blamed weak market demand, high raw material prices, the weakness of sterling and uncertainty over the outcome of Brexit discussions. Who is Jingye? Jingye emerged as the most likely owner after talks with Ataer, a division of the Turkish military pension fund Oyak, fell through in October. Founded in 1988 by a former Communist party official, Li Ganpo, the Chinese conglomerate has hotel and retail interests. However, steelmaking, which it started doing in the early 1990s, is now its primary focus: its Chinese mills produce about 15m tonnes of steel a year, exporting to 80 countries. How much is Brexit to blame? It is not the only factor in the crisis, but it is important and will remain crucial even if Jingye buys British Steel. Steel contracts are typically agreed well in advance of the product being delivered. As things stand, the UK is due to leave the EU on 31 January after another delay, and the terms of that separation are yet to be agreed, meaning British Steel’s overseas customers do not know what tariffs will apply to steel they buy from the company. Sources close to the company said orders from customers in the EU and further afield had dried up as a result. Is the whole UK steel industry in trouble? The UK steel industry has been in decline for some time because of a variety of factors such as overcapacity in EU steelmaking and Chinese state-subsidised firms flooding the global market with cheap product. An industry that employed 323,000 people in 1971 now employs less than a tenth of that, at 31,900. The closure of the Redcar steelworks in 2015 was a significant blow to the sector and left the UK with only two blast furnace steelworks: Scunthorpe and the Tata Steel-owned Port Talbot in south Wales.

British Steel collapsed into liquidation in May, with orders under pressure from intense global competition as well as difficulties caused by Brexit. The official receiver took over the running of the business from the investment firm Greybull Capital while a buyer was sought.

Jingye’s move for British Steel came after talks fell through between the official receiver and Ataer Holding, a subsidiary of the Turkish military pension fund Oyak.

Jingye’s chairman and founder, Li Ganpo, has spent the past week in Scunthorpe, home of British Steel’s steelworks, in talks with government officials, trade unions and local politicians.

The Chinese conglomerate, which also has hotel and retail interests, produces about 15m tonnes of steel a year in China and it plans to expand internationally. Jingye pledged to invest in “identifying new markets and products” for British Steel.

Li said: “We know that this is only the start of the hard work of revitalising British Steel. But we believe that this combination will create a powerful, profitable and sustainable business that will ensure the long-term future of thousands of jobs while producing the innovative high-quality steel products that the world needs.”

The formal sale process could take months more to complete, although it is understood to be much further advanced than talks with Ataer before they collapsed.

Steve Turner, the assistant general secretary of the Unite trade union, welcomed the end of anxiety for steelworkers and their families but cautioned that the union was seeking assurances on jobs.

He said: “There have been a series of false dawns in finding a buyer for British Steel and Unite will not be raising any false hopes without seeing detailed plans for the entire business and the ink is dry on the contracts.”

Labour’s Nic Dakin, the MP for Scunthorpe, said he had been impressed by Li’s knowledge of the steelmaking industry. He also welcomed Jingye’s pledge to invest.

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“This is a highly skilled and able workforce that has kept this business going selling steel,” he said. “The new owner would be wise to treasure the workforce going forward.”

However, the government faced criticism for allowing the sale of one of the UK’s industrial assets – a major supplier to the British railways – to a Chinese company. China has repeatedly been accused of dumping cheap steel in order to dominate the global industry.

Andrew Adonis, the former Labour transport minister who sits in the House of Lords, said Conservative governments had resisted measures to tackle steel dumping, before allowing a Chinese firm to buy it for “a pittance”. An industry source suggested that a £50m price tag equated to little more than the working capital contained within the business.

Sam Gyimah, the former Conservative party MP who is now Liberal Democrat shadow business secretary, said the deal represented Britain “being overtaken by rising economic powers”.