The British government is to directly impose an annual budget on Northern Ireland for the first time in a decade after attempts to form a power-sharing government between Irish nationalists and pro-British unionists collapse.
The move is a major step towards a return to direct rule from London, which many fear would destabilise the delicate political balance in Northern Ireland.
It also creates a major headache for British Prime Minister Theresa May as she negotiates Brexit.
Irish Nationalists Sinn Fein and the pro-British Democratic Unionist Party have shared power in Northern Ireland for a decade under the terms of the 1998 Good Friday peace agreement, which ended three decades of violence in which 3600 died.
But Sinn Fein pulled out in January, complaining it was not being treated as an equal partner. The latest round of talks on re-establishing the devolved executive collapsed on Wednesday.
Sinn Fein leader Gerry Adams said the party was open to meaningful dialogue.
Britain's minister for Northern Ireland James Brokenshire said as there was no immediate prospect of a new executive being formed he had no choice but to start the process of setting a budget to ensure funding for essential services.
The move also revives the question of what role the neighbouring Republic of Ireland should have in the governance if power-sharing collapses.
Dublin argues under the Good Friday Agreement it should have a role in the direct running of the region if power-sharing breaks down.
Foreign Minister Simon Coveney in September said "there can be no British-only direct rule", which prompted a British government spokesman to say Britain would "never countenance" joint authority.
Sinn Fein on Wednesday called on Ireland to play a role, saying the British and Irish governments should together "act urgently to deliver equality" in Northern Ireland.
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