DRI, the motor industry consultant, says the move represents the latest step in a restructuring of the UK market that could bring production by Japanese car makers to 900,000 - largely for export - by the end of the decade.
Garel Rhys, head of economics at Cardiff Business School, said the investment could provoke other Japanese companies to look again at Britain as a business location.
'It will increase the critical mass of a rejuvenating British motor industry,' Professor Rhys said. It could also help the trade balance as Japanese car manufacturers are exporting about 80 per cent of their production.
Honda has an annual sales goal for Europe of 300,000 cars, compared with a projected 180,000 this year. The fresh capital, which will create 1,000 jobs, is part of a long-term strategy to take advantage of market opportunities in Europe, Africa and the Middle East. However, it is not expected greatly to increase Honda's share of the UK market, less than 2 per cent.
Professor Rhys estimated each new car job would create an extra three jobs in the wider economy.
Honda, Nissan and Toyota together made 316,000 cars in Britain last year and are likely to increase that to 450,000 or 500,000 in 1995.
The expansion follows the pounds 800m takeover of Rover, Honda's long-term British partner, by BMW of Germany.
BMW's acquisition angered Honda and caused widespread concern over future Japanese investment in Britain.
Alan Pulham, of the Retail Motor Industry Federation, said: 'This expansion was already inevitable when Honda first invested in the factory at Swindon. The space and potential there made it clear that it was a very small beginning.'
Honda began production of the Accord model at the pounds 370m Swindon factory in 1992 and will add a replacement for the current Concerto model in the autumn.Reuse content