MG Rover administrators PricewaterhouseCoopers (PwC) on Friday morning said it would begin making the company's employees redundant.

PwV Ian Powell partner and MG Rover joint administrator said in a statement: "We have received a copy letter from SAIC early this morning which communicates to the DTi that they are not willing to acquire either the whole or part of the business on a going concern basis.

"In light of this important development we have concluded that there is no realistic prospect of obtaining sufficient further finance to retain the workforce while the position with other parties is explored. As we indicated earlier in the week significant redundancies will now be effected.

"Steps are now being taken to formally notify employees who will be made redundant. The administrators have established an employee helpline and made arrangements with the Redundancy Payments Office in Birmingham to handle employee redundancy claims."

Sources have told TV news programmes that at least 5,000 redundancies can be expected with notices going out at the weekend - Rover's £6.5 million loan from the government last weekend was enough to pay staff until next Monday.

In the statement, PwC partner and joint administrator Tony Lomas added: "We have worked closely with the unions, government, employees and directors to understand the position and the options for the business.

"It was apparent that very significant funding would be required to sustain the business as a going concern and that a sale of the complete business would be extremely complex and would take a long time to conclude.

"In addition to exploring the interests of SAIC we have received a number of other enquiries. In our view, none of these is capable of resulting in a sale of the complete business.

"During the course of this week we have made every effort to establish SAIC's intentions. We have had regular contact with SAIC's advisers and had established direct contact with the company.

"SAIC has now stated its intentions and unfortunately does not wish to acquire the business."

Powell also said: "We are extremely disappointed that SAIC has decided not to progress discussions to acquire the business. We are very conscious of the impact this news will have on the employees, their families and the businesses dependent on MG Rover Group."

The administrators will hold a press conference at 3pm Friday.

The news will be a huge blow to the Labour government which is seeking re-election on May 5. Ministers have been doing everything possible to avoid MG Rover making thousands of layoffs in the West Midlands, an area with several seats that it held with only small majorities in the last general election.

Regulations hinder SAIC purchase