The UK government’s ‘wait-and-see’ stance on the euro is threatening further investment in two thriving British car plants, reports published today say. The news comes only two days after General Motors Europe announced the axing of its Vectra plant at Luton, just north of London, with the loss of 2000 jobs. One of the plants at risk is the Peugeot plant in Ryton, near Coventry in the Midlands, which is currently operating three shifts to build the 206. Also under a cloud is Europe’s most productive plant, the Nissan Micra, Almera and Primera-producing operation in Sunderland, north-east England.

According to The Financial Times, PSA Peugeot Citroën, the French carmaker, has said that a E150m ($US132m) investment in the Ryton plant could be jeopardised by Britain’s attitude to the euro.

Jean-Martin Folz, PSA chief executive, told the FT that plans for a new paint shop at the Peugeot 206 factory would be subject to an intensive review. Without a new paint shop, due in 2003, the future of the plant is uncertain.

“Before taking this decision we will have to review the advantages of doing this investment in the UK,” the FT quoted Mr Folz as saying. “When doing this we will have to know exactly where the pound is versus the euro.”

Unlike Vauxhall‘s Luton factory, Peugeot’s Ryton plant is operating at full capacity, on three shifts, to meet strong demand for the 206 model. Although the factory is profitable, industry experts warned that any decision not to replace the 30-year-old paint shop could pave the way for the plant’s long-term rundown.

The FT says that the threat emerged as Stephen Byers, the trade and industry minister, signalled that members of parliament should expect more redundancies in manufacturing industry.

In a statement to the House of Commons on the Vauxhall plant, he said: “It is clear that at a time of globalisation many sectors of industry are going through major restructuring.”

He stressed that the best defence was not hefty aid packages but for the government “to provide economic stability”.

Meanwhile, The Times reported that fears grew yesterday that Nissan will next month announce the end of Micra production in the UK, with the loss of 2,000 jobs, after it emerged that the Japanese company has repeatedly warned the Government that the UK’s position on the euro makes it an unattractive location.

The newspaper said Mr Byers is to meet Nissan, which is controlled by Renault, before an expected announcement in the middle of January. Mr Byers, whose Newcastle electorate is close to Nissan’s only UK plant in Sunderland, will make a last-ditch attempt to persuade Nissan to build the new Micra in the UK. But it is understood that the carmaker has continually emphasised to the Department of Trade and Industry that Britain’s isolation from the euro makes car manufacturing unprofitable and that the single currency is Nissan’s main consideration.

According to The Times, it is feared that the new model of the Micra will go to a French or Spanish plant – Renault has plants in both countries and there is a large Spanish Nissan manufacturing operation.

Nissan’s mood has not changed after recent strengthening of the euro because the company believes that currency stability is the most important factor. A spokesman for Nissan told The Times: “We have had two years of decline with the euro. The stage we are at now could be just a flash in the pan. The Micra will go to where it is most profitable.”

The Times reports that Nissan’s mid-January statement is expected after an executive meeting of the company and after it has learnt the European Commission’s ruling on a £40 million ($US59 million) aid offer from the Government. Sir Ken Jackson, general secretary of the Associated Engineering Employees Union, will press Mr Byers this week to offer additional help. But the aid is not believed to be key to Nissan’s decision.