Motoring business RAC is set to become part of insurer Norwich Union after supporting a £1.1 billion takeover that could lead to 1,700 job cuts.

Norwich Union owner Aviva said the proposed tie-up with RAC would create a "powerful new force" in the UK insurance and motoring services industry.

It will provide Norwich Union's general insurance subsidiary with access to RAC's 2.2 million individual roadside members and an additional 4.5 million corporate customers.

The two companies already have a relationship as the RAC has provided services to Norwich Union's own branded roadside assistance service. The deal will also realise the potential of the RAC brand in insurance and financial services, an area the motoring company recently said it was looking to expand in.

Aviva said it will pay 4621/2 pence cash and 0.7154 new Aviva shares for each RAC share.

However, the deal will come at a cost to the combined UK workforce of 24,000, which Aviva said it planned to reduce by 1,700.

About 900 jobs were expected to go through the combination of support functions, with another 800 lost through moving office jobs offshore.

Both Norwich Union and RAC employ a large number of staff in the Birmingham area.

A spokesman for RAC said the 900-strong technical and customer facing call centre staff at its control centre in Bescott, Walsall, were unlikely to be impacted by the takeover.

However some of the 500 Norwich Union workers in Birmingham, which specialise in insurance, have roles in those areas earmarked for rationalisation.

A spokeswoman for Aviva said it was still far too early to speculate where jobs would be lost.

" We have only just announced a proposed takeover, the impacts on individual jobs and the location of losses are going to remain unknown for some time yet.

"In the long term, despite an initial rationalisation, we would hope to grow the company which would actually increase jobs."

The board of RAC, which announced on Tuesday that it had received an approach, has unanimously backed the proposal, which now requires the approval of shareholders. It is still possible that a rival offer could materialise.

Although it is traditionally known for its roadside recovery service, the RAC's portfolio of businesses ranges from the BSM driving school to travel insurance and vehicle leasing.

It has about 275,000 motor and home policyholders under the RAC Insure brand, while its business services arm includes Lex vehicle leasing - a joint venture with HBOS offering contract hire, fleet management and car finance services.

The RAC takeover comes less than a year after rival, the AA, was bought by a private equity consortium for £1.75 billion.

Aviva anticipates cost savings of at least £80 million a year from the deal in 2006. It will retain the RAC and BSM brands.

The firm's Norwich Union Insurance arm holds a 14 per cent share of the UK general insurance market.

The deal was announced as Aviva said worldwide operating profits rose 25 per cent to £2.34 billion in 2004.

The improvement was driven largely by the company's general insurance business, where operating profits rose 47 per cent on the year to almost £1.33 billion.

Aviva also achieved savings of £225 million in 2004, including through the transfer of 3,700 jobs in the UK to India.

Chief executive Richard Harvey said the figures showed Aviva was "thriving" with the takeover offering potential to "create significant value" for shareholders.

"It enhances the strategic position of Norwich Union Insurance and accelerates its growth plans in a changing market place," he said.