Europe could block Jaguar plan

The euphoria that greeted news of Jaguar's planned pounds 400m investment in a new car plant was dampened last night when the European Commission hinted that it might not clear the deal.

Regulators in Brussels are examining whether an pounds 80m UK government contribution towards Jaguar's costs should be blocked as anti-competitive.

The investment, to build a new medium-sized Jaguar, is the largest in the UK motor industry this decade. It would not only generate about 6,000 jobs but secure Jaguar's future in Britain.

Ford, Jaguar's parent, threatened to build the car in America unless it received pounds 80m in grants. Despite considering the aid package for four months, the European Commission said yesterday that it had still not decided whether it should be approved.

Brussels regulators are coming under increasing pressure to block subsidies, having been roundly criticised over allowing aid for the airline and steel industries.

The Department of Trade and Industry yesterday insisted that it did not expect any problems about approval from the commission. But Karel Van Miert, competition commissioner in Brussels, said: "We are looking at the case. We have no firm opinion yet.'' Although he believed that some of the aid might be justified, he added: "I am not in a position to judge whether the amount can be accepted or not.''

Jaguar intends to build a production plant in Birmingham to make a car, code-named X200, to challenge medium-sized Mercedes and BMW vehicles.

Ford is being given pounds 48m of regional selective assistance and the remainder in grants and benefits from agencies and local authorities.

The DTI said that the conditions attached to giving selective assistance - job creation in a high unemployment area and viability of the project - were well within Brussels' criteria. "This is not a subsidy for an uneconomic project,'' said the DTI.

Mr Van Miert, attending a conference in London yesterday, could give no indication of when a decision on the aid could be taken. Other motor manufacturers have queried the legitimacy of the grant. A director of a Japanese car company in the UK told the Independent this week: "How they could get this through the competition regulators is a mystery to me.''

Ian Lang, the new Trade and Industry Secretary, defended the decision to grant aid, arguing that Jaguar had not been "bailed out" with taxpayers' money.

The expansion will create about 1,300 jobs at Jaguar's Castle Bromwich plant in Birmingham and at Ford's plant at Halewood, Merseyside, which will be responsible for body pressings.

It is also estimated that building the new car will create a further 5,000 jobs in the UK motor industry.

The new car is scheduled to go into production in 1998/99, eventually turned out at a rate of 100,000 a year, compared with Jaguar's existing annual output of about 50,000. About 45 per cent of sales would go to America. Prices are expected to start at about pounds 25,000.

The investment should help reinforce a recent recovery in Jaguar's fortunes as the company is this year expected to make its first profit since it was purchased by Ford in 1989 for pounds 1.6bn.

Jaguar has lost almost pounds 800m over the last six years due to recession, but in the first six months of this year sales rose 37 per cent, with sales in the US up 28 per cent.

Garyl Rhys, motor industry professor at Cardiff University, said: "Without this investment, Jaguar would probably have withered away in about 10 years time. This is a renaissance for Jaguar.''

Jaguar, which began life in 1992 as a motorbike sidecar maker, needs to produce a car with wider appeal if it is to survive. Jonathan Storey, of European Automotive Research, believes Jaguar could make a serious dent in a vehicle class currently dominated by German manufacturers.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
Life and Style
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own