50,000 jobs are riding on MG Rover's Chinese deal

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Ministers are worried that up to 50,000 jobs in the West Midlands could be lost if MG Rover fails to secure the £1bn merger with its Chinese partner.

Ministers are worried that up to 50,000 jobs in the West Midlands could be lost if MG Rover fails to secure the £1bn merger with its Chinese partner.

Officials at the Department of Trade and Industry have secretly asked Advantage West Midlands, the regional development agency, for its best guess on possible job losses if MG Rover's Longbridge car plant were to close.

Industry experts believe that as many as 50,000 - on top of the 6,500 workers employed at Longbridge - could be affected if MG Rover's proposed deal with Shanghai Automotive Industry Corporation (SAIC) collapsed.

While MG Rover is financially weak, it supports hundreds of component manufacturers and service companies in the West Midlands. A spokesman for the Birmingham Chamber of Commerce and Industry said: "The closure of Longbridge would be devastating to the area. MG Rover does not manufacture a great deal, it assembles. This means local suppliers and manufacturers of components would be badly affected, as would the whole regional economy.

"Even if the SAIC deal goes ahead, there is a question of how much production and assembly would be switched to China. Obviously, this would have an effect, too, on jobs and the economy."

The news reveals the deep concerns the Trade and Industry Secretary, Patricia Hewitt, has over the future of MG Rover and the political consequences its collapse would have for the Government.

It is also understood that the West Midlands jobs figure will be used when the DTI lodges a submission with the European Commission for approval of a package of help for the ailing car manufacturer. Measures under consideration include allowing MG Rover to defer millions of pounds in VAT payments. Sources said that DTI officials were now finishing off the documents to be sent to Brussels.

The DTI refused to comment on its approach to Advantage West Midlands or its presentation to the European Commission. However, a spokeswoman said: "The Secretary of State has made it clear that the Government fully supports the joint venture between MG Rover and SAIC, and hopes that the negotiations are successfully concluded as soon as possible."

This week is a critical time for MG Rover's proposed tie-up with SAIC. The Chancellor, Gordon Brown, will take time out of his four-day trip to China to meet Ma Kai, the Minister for the National Development Reform Commission, which must approve SAIC's deal.

Chinese media have reported that the Beijing government is divided on whether to allow SAIC to buy MG Rover. Some officials see the £1bn price tag as too high for a loss-making company that is losing market share. Others believe SAIC's deal with MG Rover will give the Chinese company access to an established brand and research and development skills, according to the reports.

Meanwhile, on Thursday, Ms Hewitt will meet a delegation from 150 Chinese businesses, who are in the UK to promote closer trade ties. While SAIC will not attend, Ms Hewitt is expected to raise the issue of MG Rover with the Chinese Ambassador, Zha Peixin.

A spokesman for SAIC said: "We remain positive about the deal, and talks are on track."

While the exact details of the deal have yet to be agreed, it is likely that for its £1bn investment in MG Rover, SAIC would get a 70 per cent stake in the business. The two companies have also discussed future production and hope to increase capacity to one million cars a year, produced in both Longbridge and China.

However, even if the tie-up goes ahead, there are likely to be thousands of job losses at Longbridge, as SAIC seeks to make cost savings.