Venture capitalist 3i is closing its Birmingham office in a major blow to the prestige of the city's financial sector.

The group, which helped save van maker LDV, is retrenching to London after more than 50 years and shuts up shop in six weeks.

Half the 12-strong team switch to the capital while the rest are likely to be made redundant.

There have been rumours for weeks that the City Plaza office could be vulnerable, but the blow fell yesterday in an announcement by UK and Midlands director, Richard Bishop.

The firm's Reading office is also being shut.

The growth capital side will go to London - it is involved in "minority situations" like funding companies looking to grow organically, supporting acquisitions and offering financial solutions for family firms looking to get cash out whilst keeping overall control.

The UK buyout business covering MBOs is being split between London and Manchester.

Mr Bishop said they were looking at a "potential" six redundancies although there were discussions taking place about possible transfers.

He will head the new national growth capital business although he will remain living in the Midlands.

"We are looking at building a national growth capital business that is going to invest in large, fast- growing businesses which are looking to internationalise themselves," said Mr Bishop.

"We want a team in place that has critical mass and can resource flexibly so that we can get the best out of them. The best location for that is London."

But he insisted that 3i would continue to invest in the region.

He went on: "I have spent my career in the Midlands and have a good record. We want to keep investing here."

Mr Bishop denied suggestions that the move might be considered a retrograde step which would probably lead to 3i losing interest.

Instead he pointed to how the group had pulled its office in the East Midlands a few years ago yet was still investing there.

"I would disagree," said Mr Bishop. "Just because there is no base in an area does not mean we can't invest there. We see the Midlands as an important market for 3i in the long term.

"Our challenge is to make our investment in the Midlands work. It is up to us to demonstrate we can do it."

However rivals are sure to see the pull-back as an opportunity to raise their own market share at the expense a group whose most famous deal in recent years has been financing both the survival of LDV when its Dutch parent went bust and then partaking in the restructuring package which allowed the firm to bring its new van range to market.

Deals over the last year or so have included the buyouts of Interflora and Nottingham-based Pharmaceutical Profile.

Mr Bishop said: "Our major growth capital investment was LDV and we are going to stay connected with them. We will be as actively involved in our capital portfolio as we always have."

Birmingham Forward chief executive Simon Murphy denied the move was a setback for Birmingham.

He said 3i's restructuring was a matter for them, but, with the on-going redevelopment of Birmingham, it would remain an "important player" in providing the investment to make that happen.

"There is plenty for them to do," insisted Mr Murphy.

"3i and many other VCs will remain active and will still be doing business here. The money will still be spent here.

They are not going to be walking away from that."

And that, he noted, was far more important than having an office in Birmingham.

It was, he claimed, now quite easy to commute between Birmingham and London.

However John Lamb, spokesman for Birmingham Chamber of Commerce, said the closure was "not good".

He warned: "The jobs loss to Birmingham is not that significant, however the effect on prestige of having a financial sector company leave the city is not good.

"It is a pity they can not sustain the office. Nevertheless it won't have that big an impact."