Page last updated at 18:51 GMT, Tuesday, 7 April 2009 19:51 UK

UK car firms get European funding

Nissan factory in Sunderland
Nissan's operations in the UK will receive 185m

The European Investment Bank (EIB) has approved funding for two carmakers in the UK, Jaguar Land Rover and Nissan.

The EIB approved a £340m (366m euros) package for Jaguar Land Rover to help cut vehicle emissions.

And it awarded Nissan £370m (400m euros) - to be split equally between its plants in Sunderland and Spain - to build more fuel-efficient vehicles.

The funding is the first money provided to any carmaker in the UK since the financial crisis began.

'Very pleased'

The moves come as the car industry has been hit globally by a slump in sales.

Nissan said it was "very pleased" with the approval of the EIB loan.

"Nissan joins the other manufacturers in applauding the move by the EIB to extend support to the automotive industry through this crisis," the company said in a statement.

Jaguar Land Rover also welcomed its £340m funding. The company had applied for a minimum of £270m.

"This loan will support Jaguar Land Rover's significant investments in environmental technologies that are crucial for the future," the firm said.

Unions said the approval was "excellent news".

"We wish it could have come sooner but we have it now so we're very pleased," Terry Fitzgerald from Unite the union said.

"This is certainly not a handout. This is a loan which will be repaid to the government as soon as we are in a position to do so," he added.

Government guarantee

Under EIB rules, any loan requires that carmakers must invest in new technology to lower emissions during vehicle production and driving.

Jaguar Land Rover Halewood plant in Merseyside
Jaguar Land Rover will receive more money than it had asked for

The EIB loans will require some form of guarantee from the UK government before any money is paid.

The Federation of Small Businesses welcomed the EIB's support, but said the loans had to be implemented as soon as possible by the government to ensure businesses involved in the supply chain could benefit from it.

Business Secretary Lord Mandelson said: "This is good news and offers the opportunity for real help for UK car companies."

The bank also approved a loan for a Volkswagen plant in India.

The money is part of a 7bn euro lending package to support Europe's motor industry.

The latest announcement adds to the 3.6bn euros in loans already approved. The bank's board will consider further applications for funding in May and June.

The EIB has now raised its total lending by 15bn euros per year for 2009 and 2010 compared with previous years.

John Cridland, CBI's deputy director general, said: "These loans are a great piece of news for the UK car industry, which is currently suffering a sharp and ongoing slump in demand."

"We hope the UK government will also help by introducing a short-term scrappage scheme that rewards consumers who replace their older, less efficient cars with newer, more efficient models."

Struggling industry

Based in Gaydon, Warwickshire, Jaguar Land Rover employs about 15,000 people in the West Midlands (Castle Bromwich, Coventry and Solihull) and Merseyside (Halewood).

Nissan's plant in Sunderland opened in 1986 and employs about 4,900 workers.

Some 12 million people are employed in the European car industry, including 800,000 workers in the UK.

Figures released on Monday illustrated the gloomy state of the UK car industry.

UK car sales dropped 30.5% in March, compared with the same month a year earlier, according to the Society of Motor Manufacturers and Traders (SMMT).

The industry argues that help is needed immediately for carmakers to ensure they can survive the recession.

The government has set aside £2.3bn in support for the car industry, mostly in the form of loan guarantees as well as direct aid to car makers.

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