Deputy Prime Minister Nick Clegg has met business leaders in Sheffield after the government's decision to cancel an £80m loan to the Forgemasters company.
Mr Clegg, the MP for Sheffield Hallam, has been accused of betraying his constituents by not opposing the move.
The loan was promised by the previous Labour administration to help the firm develop parts for the nuclear industry.
However, it was cancelled last Thursday as part of a package of spending cuts designed to save £2bn.
Mr Clegg met business and council leaders at Sheffield Town Hall on Friday.
He later met the chairman of the board of Forgemasters, Tony Pedder, at his constituency office and spoke to the firm's chief executive, Graham Honeyman, by telephone.
More than 3,000 people have signed a petition calling on the coalition to change its mind over the loan.
It urges ministers "to rethink their decision... which will cost the city jobs and economic growth".
Outside the town hall on Friday, Labour Party supporters and trade unionists mounted a noisy protest as dozens of passing shoppers and city centre workers signed the petition.
Speaking in Sheffield on Friday, Mr Clegg said: "The decision to cancel the loan for Forgemasters was simply taken because it was not affordable.
"It doesn't reflect in any way on the excellence of Forgemasters as an outstanding company."
Mr Clegg said Forgemasters wanted to carry on with their "ambitious" plans for expansion.
He added: "Let me be absolutely clear, this is not the end of the story."
Mr Clegg said the decision did not reflect the "very, very strong support" the government wanted to give Sheffield and South Yorkshire, as well as other regions outside the South East and London.
He said officials in the Department for Business had been instructed to work actively with Forgemasters and were meeting with them in a few weeks.
Angela Smith, one of Sheffield's five Labour MPs who are backing the petition, said that people in the city were dismayed by last week's announcement.
"Nobody can really really understand that," she said.
"The more we look at this, the more we fail to understand why the coalition government made the decision it did.
"I am just hoping they have realised that and that they are going back to say, 'let's do something about it'."
When the loan was cancelled last week, Mr Clegg said that the money had been "promised by the outgoing Labour government as a calculated ploy to win support in Sheffield just ahead of the election".
A spokesman for Forgemasters said the meeting between Mr Clegg and Mr Pedder, who is also chairman of NHS Sheffield, was "primarily to discuss health service matters".
He said: "The £80m government loan to Sheffield Forgemasters was also discussed, but not in specific detail."