Alchemy, the venture capital company which is proposing to take over car giant Rover from BMW is reported to have withdrawn co-operation from Trade Secretary Stephen Byers' Longbridge taskforce. Alchemy Partners claims there is a potential conflict of interest between taskforce chairman Alex Stephenson and his brother Nick, who the Alchemy says was involved in a rival bid for the plant.

The Daily Telegraph says Alchemy managing partner Jon Moulton wrote to Mr Byers claiming Nick Stephenson, a former Rover design and engineering director, was involved an alternative bid fronted by ex-Rover chief executive John Towers.

The letter, partly printed in the newspaper said: "This is obviously an unacceptable basis for us to continue with the taskforce and we will not be doing so".

A Department of Trade and Industry spokeswoman said today: "The Department does not believe that there has been a conflict of interest."

The letter comes after talks held with German owner BMW and the Government raised hopes that an alternative bid could be made for Rover.

Unions said yesterday they expected a formal proposal to be made to the BMW board within a week and said thousands of jobs could be saved.

The new bid is being put together by a consortium headed by former Rover boss John Towers, who has outlined details of his proposal at a meeting at the Department of Trade and Industry.

Union leaders and BMW officials attended the talks, which were chaired by Trade and Industry Secretary Stephen Byers.

Transport and General Workers Union general secretary Bill Morris said: "We are now very clear that BMW is prepared to give consideration to an alternative bidder. We think the bid is a viable one.

"We anticipate that within a week a formal written proposal will be put to the BMW board."

Mr Morris said there was no painless solution and there would be some job losses but "nowhere near" as many as under the current bid from Alchemy, which is expected to be agreed later this month unless an alternative option is
considered.

Roger Lyons, general secretary of the Manufacturing Science and Finance union, said of the prospect of an alternative bid: "This is a serious proposal to save thousands of jobs. It deserves priority attention from BMW. The Government's role is crucial to the success of the alternative bid."