The Nissan car company's British chief called on the Government yesterday to move closer to the euro or risk thousands more jobs being lost in the motor manufacturing industry.

John Cushnaghan, managing director of Nissan Motor Manufacturing (UK) Ltd, said that British industries were "not playing off scratch". He said: "UK manufacturing is trying to compete globally with an unsupportable burden on its back. Our competitors make better strategic use of their currencies and target our markets.

"It's a frightening prospect for the UK automotive industry. These are not normal circumstances. The dice are heavily loaded against UK-based companies and the dangers are both severe and imminent.

"EU monetary union has happened and it's not going to go away. The UK has the worst of all possible worlds as we are competing outside a major currency block. The greatest threat lies with the strength of sterling and the idea we can ignore the EU. We need to move closer, and not, as some would have it, move away," Mr Cushnaghan said at the International Automotive Conference in Sunderland.

But Business for Sterling, the Eurosceptic business pressure group, said the call was unrepresentative of international companies operating in Britain. Nick Herbert, the group's chief executive, said that it was "incredibly shortsighted" to call for the euro in the hope that it would force an artificial devaluation. Even if it was possible the gains would be short-lived and offset by the costs of EMU.

He said: "Sterling has been stable against the dollar. The real problem is the euro's weakness - a major cause of which is the flow of investment out of the eurozone. Britain is getting more inward investment than Germany and France together."

He pointed out that last week Honda announced a big expansion in Britain, recruiting 1,000 workers for its second plant and bringing its total investment to £1.2 billion.

Michael Portillo, the Shadow Chancellor, also countered Mr Cushnaghan's argument. He said that, since the euro was launched, Britain had continued to do well and inward investment had poured in. Unemployment was higher in countries such as Germany than Britain. "There is no case for the UK to give up the pound," he said.

Nissan later moved to allay fears that the cost-cutting exercise annnounced by Mr Cushnaghan would result in job losses in Sunderland. The firm plans to cut costs by almost a third in the next three years to ensure its competitiveness.

The Sunderland plant has been the most productive in Europe for the last three years but needs to streamline costs to ensure that it will be chosen to produce Nissan's new Micra in 2003.

Mr Cushnaghan said: "The competition within the Nissan global group for new products is intense. Nissan and all of its UK-based component suppliers carry a heavy burden with the high value of sterling."

Nissan later confirmed the costs were not related to the workforce. It said: "It is part of the Nissan revival plan to reduce costs by 30 per cent.

"They are development costs, logistics costs and the costs of materials and components - basically the cost of developing the whole vehicle."