Car giant Jaguar Land Rover is to invest £355 million to build low-emission engines in the UK, creating up to 750 jobs, the company announced today.
The new facility will be based at a business park near Wolverhampton in the Midlands, with work due to start early next year.
"We expect the engine manufacturing facility to create up to 750 highly-skilled engineering and manufacturing posts at Jaguar Land Rover, along with hundreds more highly-skilled manufacturing jobs in the supply chain and the wider UK economy," said Dr Ralf Speth, chief executive of Jaguar Land Rover.
"This is truly exciting news and is a major commitment for our company.
"As we invest £1.5 billion a year for the next five years in new product developments, expanding our engine range will help us realise the full global potential of both our Jaguar and Land Rover brands."
Dr Speth said the new four-cylinder engines will increase JLR's capability to offer high-performance engines while ensuring continued significant reductions in vehicle emissions.
He paid tribute to the "strong support" from the Government, trade unions, local MPs, local authorities and the company's own employees.
Len McCluskey, general secretary of the Unite union, said: "This fantastic news is the culmination of 18 months' hard work by the workforce and Unite, the local council and local MP Jack Dromey, working with Jaguar to bring this plant to the Midlands.
"A forward-thinking approach and total determination by the local unions to bring new work to the UK ensured a competitive labour agreement could be reached to secure this new plant.
"It is excellent news for manufacturing at these difficult times, and most of all it will be celebrated by the Jaguar workforce and their families.
"Their hard work has contributed greatly to this company's global success, and the sacrifices they have made in recent years have helped Jaguar not just weather the worst global downturn for generations, but grow.
"This illustrates perfectly how a business can thrive when it works with its workforce and their unions, building on their skills and commitment.
"Local and central governments past and present have had a hand in this good news, and that is to be commended."
JLR has enjoyed a dramatic turnaround in fortunes in recent years, boosted by strong demand from emerging markets such as China and Russia.
The company reported pre-tax profits of £1.1 billion in the year to March 31, up from £14.6 million the previous year. Revenues increased 51% to £9.9 billion.
Tata Motors, controlled by billionaire Ratan Tata, bought the company from Ford for £1.5 billion in June 2008.
But soon after the acquisition, the global car market went into reverse, pushing the company into a loss, and it said it was considering closing one of its production plants in the West Midlands in a bid to cut costs.
As the car market began to recover, the management last year performed a U-turn and said all three plants - at Castle Bromwich and Solihull in the West Midlands and Halewood on Merseyside - would stay open.
With sales showing growth, the company announced an increase in investment and said it would create an additional 1,500 jobs at its Halewood plant.
The company has already hired 3,000 staff this year, including a record 350 graduates, and now employs almost 21,000 people in the UK.
JLR's engines are currently supplied by Ford from plants including Bridgend and Dagenham in the UK.
However, the car maker wants to take greater control of its engine production as sales boom in Asia. It is also considering building a plant in India.
At the Frankfurt motor show last week, the company unveiled three new concept cars, including a new version of the Defender and an eagerly awaited two-seater Jaguar sports car.
The announcement of the investment was marked by a visit to the company's Solihull vehicle production plant by Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable.
The Government said it was supporting JLR's project through the Grant for Business Investment scheme which is providing up to £10 million.
The site of the new engine plant - known as the i54 site - will be part of one of the new Enterprise Zones set up to boost local growth and attract new businesses.
Mr Clegg said: "Jaguar Land Rover's decision to build its new engine plant in Wolverhampton is fantastic news.
"It means over 700 new jobs for local people, an investment of over £300 million in the West Midlands and recognition of the expertise in the British workforce and manufacturing sector.
"Growing our economy has to be the number one priority for Britain, and the Government is not sitting on its hands. With initiatives like the Regional Growth Fund, putting up to £10 million into this new plant and Enterprise Zones boosting growth across the country, we're making the UK a better place to invest and do business."
Mr Cable said: "JLR choosing Wolverhampton for its new engine plant in the face of tough international competition is a tremendous boost for manufacturing in the UK and the West Midlands in particular.
"This announcement sends out strong signals to potential inward investors across the world and is a huge vote of confidence in our successful automotive sector in the UK and the skills and expertise in our workforce.
"The Government's support for this project shows we are committed to the ongoing success of UK manufacturing and the UK automotive industry, ensuring the UK remains one of the top destinations for inward investment."
The new engines will be petrol and diesel versions, but Jaguar Land Rover said it would not release any technical details, or say which models they will be built for.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said; "Today's announcement that Jaguar Land Rover will build a new low-emission engine plant in the West Midlands is excellent news for UK automotive and comes as SMMT meets high-profile politicians to promote investment-led growth.
"Government now needs to build on this momentum, working closely with the Automotive Council to help deliver growth in automotive manufacturing and the supply chain."