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Union leaders have warned that withdrawing an £80m government loan to a South Yorkshire engineering firm would lead to job losses.

Unite wrote to Business Secretary Vince Cable urging him to honour the loan awarded under Labour to Sheffield Forgemasters to build nuclear parts.

But Mr Cable refused to confirm the loan when pressed by Sheffield Central MP Paul Blomfield in the Commons.

A review is under way into all Labour's spending decisions since January.

Unite said withdrawing the loan would cost jobs and jeopardise Britain's preparations to build a new generation of nuclear power stations.

Unite leader Derek Simpson said: "Failure to support Sheffield Forgemasters would be a colossal error of judgment.

"Britain needs companies like Sheffield Forgemasters if we are to meet our low carbon energy needs and build a modern, advanced manufacturing base.

"The uncertainty that the review of this loan and other loans is creating could cost the UK thousands of jobs if there is not a quick and positive decision by the new coalition government."

Mr Simpson also made a personal plea to Deputy Prime Minister and Sheffield Hallam MP Nick Clegg to use his influence to support the company.

He said: "Nick Clegg spent much of the election campaign talking about Sheffield and the need to support jobs in the area.

"If he is as proud of Sheffield as I am he will use his influence to do everything possible to support this very special company."

In the Commons Mr Blomfield said the Forgemasters loan had been subject to "rigorous scrutiny" and warned that the further review was causing "unnecessary uncertainty".

Mr Cable said that agreements signed off under Gordon Brown were of "variable quality" with funds granted "in a hurry" in some instances.

He said: "We inherited a very large number of projects which were agreed in a hurry in the run-up to the last general election.

"We now have to judge them on the criteria of value for money and affordability."