The Weardale Railway opened in July 2004.

The Weardale steam railway in County Durham, opened six months ago, but is now facing "cash flow difficulties".

The company is believed to have debts of about �1m and has served redundancy notices on all 36 staff.

The �5m project received backing from regional development agency, One Northeast, and the Heritage Lottery Fund, among others.

Administrators Price Waterhouse Coopers will need to find out who is owed money, and then determine if the company can be run as a going concern.

Winter services on the five miles of restored track ended on 3 January.

The directors of Weardale Railway Ltd have admitted a short-term "cash flow" problem.

'Serious issue'

The number of passengers fell about 12,000 short of what was expected by the end of the year.

Problems have also been compounded by wrangles associated with buying up land linked to the rail line.

This, in turn, delayed a planned �300,000 subsidy being paid to the project by the Heritage Lottery Fund.

John Shuttleworth, an independent councillor representing the area on Durham County Council, has long been a critic of the scheme.

He said: "Nobody objects to anybody wanting to run a train service which employs people - employing people is a serious issue.

"But this outfit have had about �1.5m of what I would say is public money.

"So, for it to have substantial debts strikes me as bad management.

"It was supposed to bring jobs to the dale, but clearly that isn't going to happen under this current arrangement."

The company says it is doing all it can to re-open later in the spring.