The proposed rescue of Jaguar Land Rover appeared close to collapse last night amid bitter disagreement over the terms of a government bailout.

The Indian owners of the company have rejected conditions demanded by the Treasury in return for guarantees that would underpin multimillion-pound bank loans to ensure its survival.

The impasse puts at risk the jobs of 14,500 people who work for the automotive manufacturer. Thousands more jobs would be lost among suppliers of components.

Jaguar Land Rover has asked the Government to give loan guarantees so it can borrow £450 million from British banks. It also wants full access to £340 million awarded to it for green technology development by the European Investment Bank but which needs to be underwritten by the Government.

According to insiders, the Treasury and the Department for Business, Enterprise and Regulatory Reform have rejected much of the request for guarantees for £450 million and have said that they will underwrite only £175 million of the European money for which Tata, the owner of Jaguar Land Rover, must pay 15 per cent up front, effectively giving it access to only £150 million. Ministers also want Tata to invest £300 million to 400 million before it will guarantee any loans. The Indian conglomerate has invested £900 million since it bought the business from Ford last year.

Additionally, the Government wants some involvement in the control of the company through a veto on some decisions, an appointment to the board and the choice of a chairman.

Tata is thought to believe that the offer is unacceptable, throwing the future of Jaguar Land Rover into doubt. Talks are said to be continuing.

Howard Wheeldon, an analyst at BGC Partners, who divulged the details of the impasse, said: “This appalling and heavy-handed behaviour by the Treasury will now put the jobs of all 14,000 remaining JLR workers in very serious jeopardy.”

Mr Wheeldon said that the Government’s wish to have some say in the running of the business “could be an attempt at backdoor nationalisation in the manner of Railtrack”.

A spokesman for Jaguar Land Rover, which agreed with unions recently that there would be no compulsory redundancies, said: “We knew that these talks would be complicated and take some time. But talks are continuing.”

The two sides have been in talks about securing finance since before Christmas after banks refused to lend to the group. Like all other carmakers, Jaguar Land Rover has been hit badly by the global slump in car sales. In March Ratan Tata, chief executive of the engineering group, expressed frustration that the Government would not enable access to finance from banks that it largely owned. He warned that there might be plant closures and job losses if the company could not secure cash.

It is believed that the Government has not been convinced that Tata is doing enough to help the British brands. It wants significant restructuring of the business to see more funds pumped into it. Government sources indicated that scaling down the European grant could be temporary and that more money would be underwritten when ministers were more convinced of the long-term plan for Jaguar Land Rover.

The Department for Business said: “The primary financing responsibility rests with the parent company, Tata. We have been actively encouraging them for the last six months to put together a long-term funding package.”

He added that the Government had appointed financial advisers to help and had been negotiating with the European Investment Bank.

Tony Woodley, joint general secretary of Unite, warned that there would be “serious repercussions” from the union if “this offer in any way jeopardises this company and British jobs”.

Workers at LDV, the commercial vehicles manufacturer, were breathing a sigh of relief after the Government granted a £5 million bridging loan, saving the company from going into administration yesterday, as talks continued between Gaz, LDV’s Russian owner, and Westar, a Malaysian vehicle importer and manufacturer.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax