Officials at the Northern Ireland Office have come under increasing pressure to abandon the project after executives at the company, Hualon, were embroiled in fraud allegations in Taiwan. More than 30 of its executives have been implicated in a stock market scandal.
The grant is being challenged in the European Court by UK and continental textile companies, including Courtaulds, which argue that the factory would destroy thousands of jobs.
Yesterday, the Northern Ireland Economy Minister, Baroness Denton, rejected suggestions that the department was withdrawing its offer. "It is wholly incorrect to say that the Government has effectively abandoned the Hualon project," she said.
The legal action in the European Court is expected to take up to 18 months, and the Government was said to be preparing to use the delay as a way of pulling out.
On Wednesday the Northern Ireland Office appeared to be backing away from the project when it said that no funds would be released until after the court case had been resolved. However, yesterday the Northern Ireland Industrial Development Board, which would oversee the project, declined to confirm that this was the case.
However, Baroness Denton said: "The position remains as previously stated, which is that the Industrial Development Board has offered £61m of financial assistance, over a period of eight years, to Hualon to establish a major textile plant on the outskirts of Belfast.
"The project is now before the European Court. It is for Hualon to decide whether or not to proceed pending the court's decision." The board refused to say whether it wanted to delay the project.
Baroness Denton's announcement astonished opponents. The British Textile Federation said: "They are completely muddled. The confusion is indicative of the whole sorry tale."
The head of Hualon, a tycoon-turned-politician named Oung Ta-ming, has been released on bail pending investigation into an alleged role in an £81m default on the payment of shares, which sent the Taiwanese stock market into freefall.
It is not the first time Hualon has been tainted by scandal. Two years ago Mr Oung served a prison sentence for share dealing irregularities.
The European Commission originally ruled against Britain's aid for Hualon, but changed its mind after strong lobbying from the Government. Ministers promised that the plant would produce high-volume, low-cost cloth of the sort now being imported from theFar East.
But comments made by the company last month suggested that Hualon would produce specialist, value-added material of the type increasingly being produced by British companies.Reuse content