Some of PR company’s 250 staff have already been made redundant after row over campaign to stir up racial tensions.

Bell Pottinger has been put into administration after the PR firm suffered an exodus of clients and increasing losses in the wake of the scandal over its campaign to stir up racial tensions in South Africa.

The administrators BDO, who had unsuccessfully sought a buyer in a fire sale of the embattled company, said it had made a number of the 250 staff redundant as it sought to recoup losses to pay off bank debt.

“The administrators are now working with the remaining partners and employees to seek an orderly transfer of Bell Pottinger’s clients to other firms in order to protect and realise value for creditors,” a BDO spokesman said. “Following an immediate assessment of the financial position, the administrators have made a number of redundancies.”

The move to put Bell Pottinger into administration does not affect its subsidiaries in Asia and the Middle East. The management of those units, which are legally separate from the scandal-ridden parent company, are in negotiations to be spun off and rebranded.

The London-based parent firm is thought to have accumulated losses of about £5m – in part related to payouts to former management, including its co-founder Tim Bell who left last summer – which it has no prospect of recouping.

“The level of those losses, compounded by the inability of the business to win new clients, was such that remaining management were left with no option but to commence the process to place all UK Bell Pottinger entities into administration,” BDO said.

BDO said the business had been “heavily financially impacted” by the loss of clients, partners and staff as the scandal spiralled in recent weeks.

The chief executive, James Henderson, resigned last Sunday, the day before the UK’s PR trade body expelled Bell Pottinger from its ranks.

Administrators from BDO informed staff of the adminstration, and layoffs, at an emotionally charged meeting at Bell Pottinger’s Holborn offices in central London.

One witness said: “There was a lot of anger and upset. A lot of talented and innocent people have had their lives and careers shattered, people who had nothing to do with a piece of morally indefensible work carried out by a small group of former colleagues.”

The Public Relations and Communications Association said it had never before “passed down such a damning indictment of an agency’s behaviour”, with the five-year minimum ban being unprecedented for a City PR firm of Bell Pottinger’s size.

The firm was being paid £100,000 a month by its client Oakbay Capital, the holding company of the wealthy, powerful and controversial Gupta family, to run a social media and PR campaign in South Africa focused on “economic apartheid”.

The Guptas have been accused of benefiting financially from their close links to the South African president, Jacob Zuma, whose son Duduzane has been a director at several Gupta-owned companies and worked for Oakbay. Both have previously denied such a relationship.

More than a dozen clients, including Waitrose, Richemont, Investec, HSBC, TalkTalk and the Clydesdale banking group, have cut ties with the agency.

Even the tobacco giant Imperial Brands, owner of Gauloises, John Player and Winston – the kind of client on which Bell Pottinger built its business – is reviewing its account after using the agency for more than two decades.

Last week, the Guardian revealed that the agency’s second-biggest shareholder, Chime, which is owned by the US firm Providence and Sir Martin Sorrell’s WPP, had handed back its 27% stake for free to escape the scandal.

The collapse of Bell Pottinger marks an ignominious end for one of the most high-profile and controversial UK PR firms of the last 30 years.

Co-founded in 1987 by Lord Bell, Margaret Thatcher’s favourite ad man, the agency built its reputation on a mix of high-profile City companies and taking on sensitive geo-political clients that others may have balked at.

Bell handled a string of controversial clients, including the Pinochet Foundation; Syria’s first lady, Asma al-Assad; the governments of Bahrain and Egypt; Oscar Pistorius, after he was charged with murder; FW de Klerk, when he ran against Nelson Mandela for president; and Alexander Lukashenko, the Belarusian dictator.

It also emerged last year that Bell Pottinger had been paid £500m to make propaganda videos in Iraq on behalf of the US government. They included short news segments made to look like Arabic news networks, and fake insurgent videos.

“As long as there is controversy about things there will be controversial characters,” an unrepentant Bell said last week. “You can’t spend your life regretting what you do.”