Along with the country's four other warship yards, Swan Hunter is not eligible for support from the EC's shipbuilding intervention fund since this is only available to merchant yards.
But speaking during a visit to the North-east, Mr Sainsbury pledged to do everything in his power to persuade Brussels to extend the fund, under which 9 per cent of construction costs can be met by subsidy.
'I have written today to European Commissioner van Miert to ask him to reconsider the circumstances under which I might again raise with him the eligibility of British warship yards for the shipbuilding intervention fund,' Mr Sainsbury said.
Officials of the Department of Trade and Industry had been instructed to open discussions with the commission, drawing particular attention to Tyneside's problems.
The news came as the Ministry of Defence told Swan Hunter's receivers that the yard could continue work for a further two weeks on three Type 23 frigates - its only order.
Britain's other warship yards are Yarrow on Clydeside, VSEL in Barrow, Vosper Thornycroft in Southampton and Cammell Laird on Merseyside, which is due to close in July. The Government has asked the EC to extend the shipbuilding intervention fund to UK warship yards on two previous occasions - the most recent being two years ago when Cammell Laird's closure was first announced - only to be turned down.
Assuming Mr Sainsbury's announcement yesterday was not just a sop to sentiment in the North-east, the chances of the Government succeeding a third time may be better.
Local MPs gave the initiative a cautious welcome. Stephen Byers, Labour MP for Wallsend, whose constituency includes Swan Hunter, said: 'It is a small step in the right direction and a sign that the Government may be shifting position but it may be too little, too late. I wish this had been done 12 months ago.'
Mr Byers is meeting the Prime Minister today along with Nick Brown, MP for Newcastle East, to press for further measures to safeguard Swan Hunter. These include guarantees that the frigate order will be finished at Swan Hunter, that the MoD will bring forward other naval orders and that the Government will assist with winning overseas naval contracts.
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