Jaguar, which will today confirm a pounds 500m plan to produce a new model, is to build the production plant on a former Spitfire aircraft factory in Birmingham.
The site, along with the adjoining former tyre factory, Fort Dunlop, has been bought by the Government as part of an pounds 80m aid package towards Jaguar's costs.
Ford, Jaguar's parent, threatened to build the new car at one of its American plants unless it received the aid. The Department of Trade and Industry was due to announce details of the package today, though it is expected to comprise pounds 50m in regional selective assistance and the rest from local authorities and agencies.
The investment, the largest in the UK motor industry so far this decade, will create more than 1,000 Jaguar jobs and an estimated 5,000 among suppliers.
News of the land purchase, made by the government agency English Partnerships, which will lease the site to Jaguar, clears up confusion about where the new car would be built in the UK.
The Spitfire buildings will be used to expand Jaguar's existing car-body plant next to the derelict site, at Castle Bromwich. It will mean that Jaguar's main assembly line will be based in Birmingham, not at its headquarters in Coventry where it has its huge Browns Lane plant and a design base.
As revealed in yesterday's Independent, executives at Ford were meeting in Detroit last night to approve final details of plans for the new Jaguar, code-named X200 and aimed at the market dominated by the Mercedes S-class and BMW 5-series.
Jaguar currently makes about 50,000 cars a year, but is planning to produce 100,000 of the new model annually by 1999.
The location of the plant has led to speculation that production of Jaguar's XJ6 and XJS models could eventually move to Birmingham from the Coventry factory.
The Government's aid package is not the largest given to industry, though it is unusual for a company already established in Britain to receive such a large sum.
Last year Samsung, the South Korean electronics group, received pounds 58m towards building a UK plant.
And in 1975 Ford UK was given pounds 75m.
Jaguar is this year expected to make its first profit since it was bought by Ford in 1989 for pounds 1.6bn.
Sales rose 37 per cent in the first six months of the year to reach 20,227.
Sales in the US, Jaguar's biggest market, were up 28 per cent.Reuse content