Brown woos SAIC in MG Rover takeover

GORDON Brown unveiled a package of multi-million pound tax breaks yesterday to persuade China's top car-maker to take over MG Rover.

The Chancellor revealed the sweetener after two days of talks with Chinese leaders in Shanghai.

Mr Brown said Britain 'strongly welcomed' the proposed takeover and added that he was confident that this view was now shared by Beijing.

However, there were fears last night that the move could trigger a backlash from Brussels, which has repeatedly warned that it will block taxpayer-funded subsidies to failing firms.

China's biggest car firm, the Shanghai Automotive Industry Corporation, wants to invest £1bn to buy a 70% stake in the British company.

Hopes of a quick deal have been knocked after it emerged that influential figures in the Chinese government are sceptical about the wisdom of such a move.

Mr Brown moved to break the logjam by unveiling the tax-break plans following talks with the man who will decide whether the deal goes ahead - the head of China's economic development commission, Ma Kai. Yesterday's meetings had been preceded by similar discussions with China's premier Wen Jiaobao and finance minister Jin Renqing on Monday.

The Chancellor said the Government's ability to help Rover was limited by the EU's strict rules on state-aid. But he revealed that there have been talks about possible tax breaks to smooth the path to a deal.

'Discussions between Rover and the Customs and Excise have been helpful,' said Mr Brown.

It is understood that the help could involve Rover being able to defer VAT payments - a move which would save its new owner millions of pounds in the short term.

However, even if a deal is reached, there are fears the takeover could see Rover axing around half its 6,500 British workers.

{1}It is understood that the Chinese want to shift production of the main Rover 25 model to Shanghai, where car workers are paid a fraction of the wages of their British counterparts.

While Mr Brown refused to say when he hoped a decision would be made, he added: 'The Chinese government are aware this is an important issue and there is great public interest in this.

'Both the government of China and Britain welcome this deal.'

A SECOND Chinese carmaker, Nanjing Automobile, is lining up to join the mainland rescue package for ailing MG Rover. Shanghai Automobile Industry Corp (SAIC), previously the sole mainland group coming to Rover's aid, said that Nanjing could become involved in the joint venture to make Rover cars in China.

Nanjing could take 20% of the tie-up, trimming SAIC's proposed stake to 50%, Press reports said.