John Towers, the businessman who led the Phoenix group in its takeover of MG Rover five years ago, has hit back at suggestions of "accounting irregularities and black holes" at the collapsed car company.

Towers claims he has been subject to "character assassination" since the trade secretary, Patricia Hewitt, ordered the City of London's most senior accounting regulator, Sir Bryan Nicholson, to hold an inquiry into Rover's accounts over the weekend.

He was responding to a report in the Guardian which identified an apparent £400m mismatch in the company's complex public accounts between money flowing in and out of the business.

Meanwhile, the Mail reports that Tony Blair knew the Rover deal with Chinese car giant Shanghai Automotive was dead before the official announcement came.

Blair is accused of giving Rover employees a false hope of keeping their jobs after an official from the Chinese group had made it clear on three occasions there would be no deal.