Jaguar set for £27m grant for new 'greener' Range Rover

The Government is stumping up £27m to help Jaguar Land Rover (JLR) develop an entirely new model of Range Rover in the UK.

The funding is not related to the support measures put together to help the recession-hit car industry, nor is it a response to JLR's pleas for help to weather the downturn. But it is tied to the manufacturer's factory at Halewood, and implies a long-term future for a plant which has been the source of much speculation since the motor sector began its precipitous downward spiral in the autumn.

JLR will not make the final decision until later this year about the proposed LRX concept car – which would be the smallest, lightest and greenest Range Rover ever made. It is not unusual for car makers to access government grants for new models. The new Range Rover could cost up to £400m to develop – from design to prototype to mass production. If it goes ahead, it will constitute a major boost to the UK car industry.

Lord Mandelson, the Business Secretary, said: "The Government is fully committed to supporting the UK automotive industry as it moves to a lower carbon future. This project would secure production and employment at the Halewood facility and maintain the design capability for Jaguar Land Rover in the UK."

Halewood currently employs 2,000 people and builds the Land Rover Freelander 2 and the Jaguar X-type. But its future has been questioned in recent months as JLR axed more than 1,000 jobs and cut production and Tata Motors, the marque's parent group, poured in hundreds of millions of pounds.

Halewood would not be the only place to benefit from a new car. Research and development companies across the Midlands would also get a piece of the action.