An independent inquiry is beginning into the affairs of Transtec, the troubled engineering firm founded by Geoffrey Robinson, the former Paymaster General.

Trade Secretary Stephen Byers told the BBC on Friday: "I have looked carefully at this.

"There are clearly a number of serious issues regarding the collapse of Transtec which I thought in the public interest required the appointment of independent inspectors to investigate exactly what happened."

He said the inspectors would report to him promptly: "I have emphasised to the inspectors that their prime objective must be to provide me with a full report as quickly as possible consistent with the need to undertake a thorough and professional investigation."

Conservative trade spokeswoman Angela Browning welcomed the inquiry.

"There is a public issue at stake," she told the BBC. "I am delighted that the minister has recognised this."

Ms Browning said the inquiry was needed because the company had been closely connected with Robert Maxwell, whose companies collapsed owing millions to pensioners, and because of its links to other companies owned by Mr Robinson and now under investigation.

Litigation

But David Heathcoat-Amory, shadow chief secretary to the Treasury, said the government could face legal action for failing to act sooner.

He told the BBC: "I wrote to them in 1998, more than a year ago, about these matters including Transtec and they ignored it.

"So I believe they could face legal action from shareholders and from suppliers to Transtec who may not be paid and even from the workforce if they lose their jobs.

"The inquiry is only apparently into the collapse of Transtec and those circumstances. What I want is an inquiry into how Transtec was formed out of Robert Maxwell industry outlets and also the link between Robert Maxwell and the Labour Party and Geoffrey Robinson, all of which maybe extremely embarrassing for the Labour Party.

"Until we have a comprehensive inquiry which is published, we will not be satisfied and we will still believe that there is a political cover-up going on here."

Receivership

Transtec was put into receivership just before Christmas when it emerged that there had been substantial accounting irregularities.

These mainly related to an $18m (£11.25m) claim against Transtec by the Ford Motor Company which was not disclosed to shareholders.

The engineering company, which was founded by Mr Robinson in the early 1980s, produces automotive parts.

Mr Robinson's substantial shareholding of 16% is now essentially worthless since the company has been put into receivership.

Resigned over secret loan

Geoffrey Robinson has been a controversial figure since before he left the government a year ago in connection with a secret £373,000 loan made to Peter Mandelson for the purchase of a house in Notting Hill, London.

The loan, made in the run-up to the 1997 general election, remained secret even when Mr Mandelson became trade and industry secretary - in charge of the department which was inquiring into some of Mr Robinson's other business affairs.

Revelation of the loan's existence led to the resignation in disgrace of both men. Mr Mandelson then returned to the cabinet as Northern Ireland secretary 10 months later.

Mr Robinson has been a substantial financial donor to Labour coffers and many senior government figures have enjoyed his hospitality. Prime Minister Tony Blair and his family holidayed twice in palatial overseas homes owned by the Coventry North West MP.

The former minister has also been a close ally of Gordon Brown, bankrolling a think-tank which helped research policies he would later be in a position to enact as chancellor.

Also in Mr Robinson's portfolio is the left-of-centre New Statesman magazine, which he bought with Mr Blair's encouragement in 1996.

He resigned as a director of Transtec when he entered government, and he claims to have no knowledge of the poor accounting practices which occurred after his departure.

He was cleared by the DTI in December of any wrongdoing in relation to his other business interests.