Agreements of the kind made by the Government and the German car manufacturer have to go before the European Commission's competition commissioner Karel Van Miert to ensure they do not break stringent anti-competition laws. A spokesman for Van Miert said: 'It should be made quite clear that the UK Government must notify the aid to the Commission and indeed withhold any payment until the Commission has formally approved the proposal. 'The key issue is the mobility of the project. The EU rules for aid to the motor vehicle industry require that such aid be indispensable, in other words, that the recipient company has the choice of investing at another specific site and would indeed invest there if it did not receive aid. On the issue of mobility, the commissioner remains to be convinced.'
Van Miert is understood to want proof of the seriousness of BMW's earlier threats to shift car production to Hungary if a deal with the British Government was not agreed. The EC is also concerned that it has only had one opportunity to discuss the deal with UK officials at a meeting in May, and has not yet received full formal notification of the deal. A meeting between the DTI and Van Miert has been arranged for July 7.
But Stephen Byers, Secretary of State for Trade and Industry, said: 'I'm confident in the light of discussions that I've had with the EC that, particularly when looking at the level of investment from BMW, there will be no question that the Government will be authorised to make the contribution.'