The British printing firm that lost out on £490m contract to make the post-Brexit blue passport is dropping an appeal against the decision, less than a month after the firm’s boss vowed to fight the government.

De La Rue said it had made the “pragmatic business decision” after taking legal advice and having “considered all options”. The company, which prints the current burgundy passport as well as bank notes, said it remained surprised and disappointed by the decision to award the new contract to the Franco-Dutch company Gemalto.

However, chief executive Martin Sutherland, said on Wednesday: “We’ve done our homework ... on balance it looked unlikely that we’d get this overturned.

“As a business we have to act in the interests of our staff, on behalf of our customers, of our shareholders and we have to focus our efforts and energies elsewhere. It’s a slightly disappointing outcome but that’s just the rough and tumble of business.”

When it emerged last month that the government had picked De La Rue’s foreign rival for the blue passport contract, Sutherland said he would appeal the decision and challenged the prime minister to “come to my factory and explain my dedicated workforce why they think this is a sensible decision to offshore the manufacture of a British icon”.

Unite, Britain’s largest union, said De La Rue’s decision to abandon an appeal would come as “a bitter blow” to its workers, who face an uncertain future. The company employs 600 people at its printing factory in Gateshead, with about 100 of those thought to be employed in the passport division.

“Workers will feel let down that the company is not prepared to fight the government’s decision to ship the production of the new blue passport overseas,” said Louisa Bull, a Unite national officer.

“For the past decade, De La Rue has produced the UK’s passports securely without any problems and provided a source of decent, well-paid jobs in the north-east.

“Theresa May and her government is now putting all that at risk with little thought of the consequences or the shockwaves that it will send through the community and local economy.”

Sutherland said that no decision had been made about the jobs in Gateshead and that the firm was hoping to win other contracts to make up for the lost UK passport work.

“We have the [existing passport contract] for another 18 months. That gives us plenty of time to take stock, refocus and drive forward on the international front so we haven’t made any decisions about jobs in Gateshead. That gives us plenty of time to find alternative contracts to fill the gap.”

At the same time as it announced it was dropping the appeal, De La Rue issued its second profit warning in a month, blaming £4m of costs associated with bidding for the passport contract, as well as delays in the shipment of certain contracts.

The company said underlying operating profit was expected to be in the low-to-mid-£60m range for the year to 31 March. A few weeks ago, De La Rue had predicted profit of between £71m and £73m.

De La Rue is more than 200 years old and employs around 3,150 people worldwide. In the UK, the company has contracts with the Bank of England, Bank of Scotland, Clydesdale Bank and Royal Bank of Scotland to produce the newer polymer bank notes.

It also prints money for Fiji, the Maldives, Qatar, Kuwait, the Bahamas and the Seychelles, among others.