Around 50 workers at Osbaldwick based Contract Services (Yorkshire) Limited have been issued with redundancy notices.
Founder Leslie Cullum said the firm is still taking on new business and will continue to trade for as long as possible.
But he said the downturn in the construction market meant that it was not worthwhile carrying the business on in the long term.
He told the York Press: “The result is that after 38 years, we are closing the business down in a controlled manner over the next three to four months and maybe longer.
“During that time every contract will be completed and everyone has been issued with redundancy notices.
“We will endeavour to extend those notices for as long as we find it viable to. We are still looking for business to keep these people employed as long as possible.”
The business, which employs 40 to 50 people, has provided scaffolding for small projects as well as high-profile work for commercial, industrial and heritage organisations, including York Mister’s East Window and the Sadlers Wells Theatre in London.
Cullum said: “We have got some people who have been here for 30 years and the company has been at the forefront of the industry.
“We have given a lot of people a lot of jobs over the years and it’s very sad on my part that we find ourselves in this situation, but it’s the direct result of the economic situation.”