THE directors of MG Rover are likely to face a full-blown Department of Trade and Industry investigation after it emerged that a key report on the carmaker’s accounts will deliberately tell only half the story, leaving the rest to a government inquiry.

In a highly unusual move, the Financial Reporting Council (FRC), charged with investigating Rover’s accounts, has not questioned the “Phoenix Four” founding directors, although the report will recommend issues on which they should be questioned.

It is thought that it has omitted this critical questioning because it is understood that the FRC believes that there will be a broader investigation by the DTI.

The FRC will present its report to the DTI next week, although none of the conclusions will be made public immediately.

It is believed that the decision not to make the full report public is because there will be a further inquiry and because the directors have not had the chance to put their case.

Despite the huge controversy over the handling of the collapsed carmaker by the directors, led by John Towers, the DTI needs a reason to begin an inquiry.

The FRC report is expected to highlight other issues to be investigated, along with an analysis of the published accounts of the network of limited companies surrounding the carmaking operation that was set up by the directors.

The DTI will be under strong pressure to establish an inquiry, which could be led by a QC because of the large amount of public interest in the behaviour of the directors and the collapse of the business.

Yesterday the Transport & General Workers and Amicus unions, and Julie Kirkbride, the Conservative MP for Bromsgrove, called for the FRC’s report to be made public.

The FRC’s remit allows it only to study published accounts, and its only sanction is to force a company to restate its accounts if they have failed financial accounting standards. But it can also make recommendations about other lines of inquiry and concerns. It is believed that it has done this in MG Rover’s case.

MG Rover’s published accounts for most of its related companies are only as recent as the year to the end of 2003. MG Rover has always left the publication of accounts to the last deadline demanded by Companies House.

Expectations of a DTI inquiry emerged as PricewaterhouseCoopers, the administrators to MG Rover said yesterday that there was a slim chance of resurrecting carmaking at the Longbridge factory.

The administrators raised the possibility because they said that potential problems created by the ownership of intellectual property rights by Shanghai Automotive Industry Corporation (SAIC) were not as great as had been feared.

Tony Lomas, one of the administrators, said that SAIC, which had pursued a joint venture with MG Rover, owned only about “2 per cent of the exclusivity of the cars”, meaning that the Rover and MG variant ranges could be manufactured with only minor changes.

SAIC believes that it bought the full intellectual property rights to new versions of the 25, 75 and two engines and said that it had not received any communication from the administrator. The Chinese company is bidding to buy tooling and research and development equipment from PWC but does not want to retain capabilities at Longbridge.

A Russian group and an Iranian group are interested in the whole operation of MG Rover, but Mr Lomas said that the costs of restarting production could be difficult. The race to buy the MGTF sports car has narrowed to three bidders.

If no one does restart some form of production at Longbridge then it is most likely that its equipment would be sold to be exported to overseas car plants.

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