Nortel UK enters administration

Nortel is trying to restructure its operations worldwide

The UK subsidiary of telephone equipment maker Nortel has gone into administration, after its parent firm filed for US bankruptcy protection.

Nortel Networks UK, which is based in Maidenhead, said it had appointed Ernst & Young as its administrators.

Nortel employs about 2,000 people in the UK. However, the administration order also applies to the firm's operations in 16 other EU countries.

All firms will operate normally while a restructuring plan is completed.

Ernst & Young said in a statement that "adverse economic conditions" had made Nortel's current capital structure "unsustainable".

It added that Nortel had decided to restructure in order to "overcome current challenges and reposition itself for the future".

Fragile business

Nortel Networks, based in the Canadian city of Toronto, filed for bankruptcy protection on Wednesday.

The move by the firm, which is North America's biggest maker of telephone equipment, came as the global economic downturn continued to eat into its already fragile business.

Under US Chapter 11 bankruptcy protection law, a firm can keep trading while it aims to sort out its finances.

Nortel employs about 30,000 people worldwide and is a key Olympic sponsor in the UK.

Its deal with the London Olympic organising committee is believed to be worth about £40m in cash and services towards the 2012 games.

A committee spokesman said they were "aware of the situation" and would "work through it with Nortel".

It is also a sponsor of the 2010 Winter games in Vancouver, Canada.