Most of the workers who lost their jobs in the collapse of MG Rover 3½ years ago have suffered big drops in pay in their new jobs and one in ten has found no other work at all.

According to a study of hundreds of the 6,300 workers who were made unemployed by one of the biggest industrial crises in the past 20 years, two thirds have seen their pay reduced in new jobs. The average reduction is £5,640 a year, in real terms. However, nearly a third of former workers at the giant Longbridge factory near Birmingham reported that their pay had increased since they found new jobs.

The study, undertaken by the University of Birmingham, the Work Foundation research organisation, the Economic and Social Research Council and the Birmingham Business School, comes as the British car industry is facing fresh problems amid the credit squeeze. Most factories are on short-time working and are laying off temporary workers and some permanent staff.

The University of Birmingham and the other organisations have monitored the progress of a sample of workers each year since the dramatic collapse in 2005 of the last independent high-volume carmaker in Britain. The latest stage has found that 31 per cent of workers had carried on working in manufacturing and had maintained their levels of pay. However, the 60 per cent who moved into the service sector saw their pay levels fall. Those who moved to jobs in wholesale and retail, real estate and business services, education and health and social work had to take cuts of about £6,000 in annual income.

A quarter of respondents were in debt or were having to draw on savings, 36 per cent could just about manage and 38 per cent were able to save money. In terms of quality of employment, 46 per cent said that their new job was worse than the one they had at MG Rover, 21 per cent said that it was about the same and 28 per cent regarded their new work as better.

David Bailey, director of Birmingham Business School and one of the authors of the report, said: “The collapse of Rover is rightly termed ‘historic' because it marked the closure of the last volume carmaker in the UK. The finding that many workers are in what they see as worse jobs may confirm people in the view that the newer jobs in services are just not quite as good as the older jobs in manufacturing they have come to replace.”

Tony Woodley, joint general secretary of Unite, the union, helped to lead the first rescue of Rover when BMW broke up the Rover group and held on to only Mini. The independent carmaker lasted five years before it collapsed. He said: “The real lesson from the Rover experience, and one that we urge the Government to pay close attention to at this time of tremendous economic uncertainty, is that we must never again allow highly skilled, well-paid manufacturing jobs such as these to be lost from our communities.”

He added that Unite urged the Government “to make every possible use of its stake in the banks and its power to leverage in financial help to support our manufacturing sector through these tough times, otherwise we will have no industrial base from which to revive our economy”.

Richard Burden, MP for Birmingham Northfield, which includes Longbridge, said: “This report is important for looking at the long-term impact of the closure on the people involved and the community. There are also lessons in a wider context as the economy slows down and many people face a challenging time.”

When MG Rover collapsed, the Government, the regional development agency and local Jobcentre Pluses set up mobile supports to help the workforce. About 60 per cent went through training or education programmes, either through free places offered by local agencies or via new employers. However, most people who found work did so through their own efforts or personal contacts.

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