De La Rue has abandoned its plan to appeal against the government's decision to award a contract to make UK passports to a Franco-Dutch company.
The UK firm said that since its announcement on 22 March, it had "considered all options".
De La Rue has also issued a profit warning, saying annual operating income would now be around £60m to £65m.
It blamed £4m in costs for tendering to continue making UK passports, as well as delays in other contracts.
The burgundy passport, in use since 1988, will revert to its original blue and gold colour from October 2019.
Martin Sutherland, chief executive of De La Rue, initially called the decision to award the £490m contract to rival Gemalto "shocking" and pledged to appeal.
The government then granted a two-week extension in a process to decide who would make UK passports after Brexit.
That appeal process ended at midnight on Tuesday.
A spokesperson for De La Rue, said: "As we initially announced, we have looked at all possible avenues open to us, and thoroughly evaluated all our options.
"Following four weeks of intense consideration and clear legal advice, we have taken the decision not to challenge the award of the UK passport contract.
"We have been advised that the grounds for overturning the decision are insufficiently strong to justify continuing this course of action."
He added: "We remain both surprised and disappointed by the decision of Her Majesty's Passport Office to award the contract to a competitor. We believe De La Rue submitted the highest quality and technically most secure bid."
De La Rue has held the contract to manufacture British passports since 2009. It claimed that it had been "undercut on price" by Gemalto.
The firm also said it expected operating profit to be below the £70.2m it reported in its previous financial year.
As well as the cost of bidding to make post-Brexit passports, it said there had been "delays in the shipment of certain contracts" in the last week of the financial year.
De La Rue's share price fell by 8.33% to 451p in early stock market trading in London.
Unite response to news De La Rue will not be appealing UK government’s decision to make UK passports overseas
Responding to news that De La Rue will not be appealing the government’s decision to award the production of the UK’s new blue passports to the French firm Gemalto, Unite national officer Louisa Bull said: “This news will come as a bitter blow to De La Rue workers who now face an uncertain future. 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.
“For the last 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.
“It would not happen in France where they produce their own passports on the grounds of national security and it should not happen here in UK.
“Unite will be working closely with De La Rue to seek assurances on jobs as well as supporting workers through these uncertain times.
“It need not be like this though. Unite and our members are mobilised and prepared to fight the government’s decision which represents a dark day for UK manufacturing.
“Theresa May needs to wake up to the anger her government’s short sighted job destroying decision has generated and intervene to back UK passport workers by ensuring Britain’s blue passports are made in the UK.”
[press release from the union Unite]