Around 90 jobs are at risk at Sheffield’s Remploy factory after a company bidding to buy the Sheffield Road site pulled out.
Barnsley-based Metalliform, which makes school furniture, was seeking to take over Remploy’s three furniture factories at Sheffield, Neath and Blackburn.
But the company has now decided not to proceed.
James Stribley, GMB organiser at Remploy, said workers were ‘disappointed’ and had been left fearing for their futures.
“Unless a new buyer comes forward, many of our members look like spending their life on benefits,” he added.
Remploy has told Sheffield MPs it will contact other companies who previously expressed an interest in the furniture factories to see if they remain interested.
Sheffield South East Labour MP Clive Betts said: “I don’t know why Metalliform has withdrawn - although I don’t think it’s the end of the road for Sheffield Remploy.”
Brightside and Hillsborough Labour MP David Blunkett added: “Clive and I will both be seeking reassurance that a new preferred bidder does not pull out.”
The Government is ending its subsidy to Remploy after a report by a disabled charity recommended the money would be better spent helping more people into mainstream jobs.
Remploy sites are being closed or sold.
In a statement, Remploy said: “As can happen during the due diligence phase, Metalliform have now advised that they are unable to continue their bid. Metalliform have retained an interest in certain aspects of the business.”