French ferry firm SeaFrance went into official liquidation on Monday after the European commission ruled a bailout by the French government was illegal.
A French court said the offer of a buyout by a co-operative of company employees – the only rescue plan on the table – was neither viable nor acceptable.
The decision threatens to throw nearly 1,000 people out of work, 130 of them in Dover, Kent.
It follows months of speculation about SeaFrance's future and several failed rescue plans. The French government had said it would put €200m (£165m) into the company but this was deemed illegal under European Union rules.
The closure comes as a political blow to French leader Nicolas Sarkozy four months from a presidential election in which he is expected to seek a second term in office. Sarkozy told a press conference in Germany, where he was meeting chancellor Angela Merkel, that his government was working on plans to revive the firm.
"I think I can say that there will be a credible solution for all the SeaFrance workers. I will not give up," he said.
The French prime minister, François Fillon, added: "We have to find a solution for the workers."
SeaFrance sailings between Calais and Dover were suspended in November. The French company, which carried more than 3.5 million passengers a year between France and the UK, went into receivership in 2010.
A SeaFrance representative said: "We can confirm that the tribunal de commerce has made the decision to liquidate the company. Provision has been made to ensure that all customers with existing bookings will receive refunds."
However, a last-minute glimmer of hope came from Eurotunnel, which announced it was considering putting in an offer for SeaFrance's three passenger ferries. The idea would be to buy the SeaFrance assets, then lease them back to the scop (workers' co-operative) whose own bid to take over the company had failed.
"That would provide a guarantee of employment for 800 workers," a Eurotunnel spokesman said. "It would also mean the company would be run on a commercial footing, which is very important. Previously SeaFrance had been propped up by illegal state aid. The Eurotunnel proposal would get rid of the state aid issue by providing ferries that are commercially funded."
He added that Eurotunnel was waiting for information about the value of the fleet before submitting a formal bid for the ferries.
The main stumbling block is likely to be the powerful CFDT Maritime Nord union, whose representatives have been accused of "intransigence" and behaving "like pirates" after rejecting previous rescue packages. They have insisted the company should be saved by direct funding from the government and a loan.
However, SeaFrance's British competitor P&O has said it will challenge any state funding that might create unfair competition.
The national leadership of the CFDT has publicly criticised its SeaFrance colleagues for not putting workers' jobs first. The union's national secretary, François Chérèque, said on Monday they had not "behaved honourably".
