A multi-million-pound investment is due to be announced officially by the Prime Minister today.
Honda is due to announce expansion of its factory in Swindon, Wiltshire, and will signal its intention to build a new, small car alongside the Civic and Accord models.
It is understood that Honda looked at other sites in Europe before deciding to expand the factory at Swindon.
Professor Garel Rhys, a leading motor industry analyst, said last night that production at Swindon could double to 300,000 a year as a result of the expansion.
"This is a huge vote of confidence for the British motor industry, as well as the British economy," he said.
"It shows that it doesn't matter about the short-term value of the pound or where we are on monetary union. What matters to leading companies like Honda is the economic fundamentals of a country.
"Continuation of production and industrial relations are the things that attract companies.
"This announcement is pretty reassuring, given the uncertainty of the exchange rate."
Professor Rhys, of Cardiff Business School, said it was clear that Honda was making the UK its European base. He predicted that production of engines could soar to around 400,000 a year following the investment announcement. "Swindon will become a motor town. This is a very significant announcement," he said.
The Prime Minister will be speaking about the investment in an announcement today. The statement says: "This massive investment is a huge vote of confidence in the UK.
"It highlights just how attractive the UK is to invest in. We are the top country for attracting inward investment in Europe.
"It's a big boost for Swindon and a big boost for Britain."
Margaret Beckett, the President of the Board of Trade, is expected to join company officials at a news conference in London today to formally announce the investment.
At Honda's plant in Swindon, production climbed to more than 150,000 cars a year in January and 400 workers were taken on.
Although not all the new jobs in Swindon have gone to locals, Honda has already brought an enormous boost to the region. Unemployment in the Swindon area is now down to around 2.1 per cent.
In March, Honda launched the Civic Aerodeck, its third model to be made in Swindon. It was presented as a "sportswagon" which was more versatile than the existing Civic five-door hatchback on which it was based.Reuse content