MG Rover: Rescue deal has finally collapsed

The government has announced a £150m aid package following the collapse of last-ditch talks to rescue MG Rover.

Tony Blair cancelled his campaign engagements to head to Birmingham, where he was joined by chancellor Gordon Brown and trade secretary Patricia Hewitt.

The prime minister said he felt "real sorrow for all the workforce at Longbridge and their families".

"I know people have tried desperately hard to save car production at Longbridge with MG Rover," he said.

"It is a terrible shame, because there is so much commitment, so much talent, so much ability in the workforce and as you know we tried our level best to see if we could persuade the Chinese company to enter into a venture with MG Rover.

"It has not been possible to do that. Rather than delay that bad news, it is just important to say that, to come straight out with it and realise that it is not going to be possible, I am afraid, to find the Chinese buyer."

Aid package

The government aid package will include more than £60m to help diversify industry in the area and to support the supply chain, plus a further £50m to fund the retraining and re-skilling of workers.

Another £40m will go into statutory redundancy payments, along with a further £40m of previously announced cash to help with the construction of a new industrial park in the region.

The chancellor said his thoughts were with the families of the Longbridge workers and all those in supply industries.

"We understand that these are very anxious and troubling times," Brown added.

"We will do everything in our power to make sure there are jobs available and we help people to move forward so that new jobs are created."

The government intervention came after administrators PricewaterhouseCoopers said there was now "no realistic prospect of obtaining sufficient further finance to retain the workforce while the position with other parties is explored".

Ministers had provided an emergency loan of £6.5m to pay wages at the car company for this week.

But now the Shanghai Automotive Industry Corporation (SAIC) has pulled out of any further talks on a rescue deal for the company.

Redundancies

The news means that redundancy notices will now be issued to just under 5,000 workers.

Thousands of other jobs in the area which are dependent on the firm are also now in danger.

TGWU leader Tony Woodley said the unions' "worst fears had been realised".

TUC general secretary Brendan Barber added: "This is a bitter blow for British manufacturing and desperately disappointing news for thousands of loyal Rover workers and their families.

"Everything possible must now be done to provide hope and opportunity to the blameless victims of Rover's demise."

Red tape

Conservative leader Michael Howard said the news was "a dreadful blow".

He said it would hit "hardworking people who have given in some instances decades of their lives to Rover, and it is a terrible blow to them and their families".

"This is going to have, I'm afraid, very deep and far reaching consequences and it is a tragic day for thousands of workers and their families."

Howard declined to say whether the government could have saved the jobs, but said the "burdens of red tape and regulation and tax" were making it difficult for manufacturing firms.

And he said the government had got involved in the Rover situation "pretty late in the day".

"These difficulties must have been known about for quite a while and we got to a situation in the end, in the last couple of weeks, where both MG Rover and the government were negotiating from a position of great weakness," said Howard.

Regeneration

Liberal Democrat trade and industry spokesman Malcolm Bruce said it was a "sad day for Rover and will cause distress to its workers".

"We hope that a solution can be found that minimises the effect on Rover workers and their families," he added.

"It is also a blow to the local economy although the situation has been foreseen for some time.

"The administrators will have to proceed now and there will inevitably be redundancies.

"We hope that they might be able to secure something from the remainder of the company.

"The priority must be securing a long-term future for this highly skilled workforce and economic regeneration of this area."

Loan row

In another development, the prime minister has been accused of ignoring civil service and ministerial advice when he insisted that MG Rover be offered a £100m rescue package.

The FT reported that the loan would not qualify as a "prudent and proper" use of taxpayers' money, but Tony Blair wanted to go ahead anyway.

Downing Street only backed down over the loan when it became clear that SAIC was not going to go through with the deal.

"At that point, even the Blairites had to give up on a £100m loan," the FT quotes a civil service insider as saying.

Number 10 said the £100m would only have been available if there had been a deal on offer and the money could have been refunded.