Coventry is in pole position to land a new research centre for Indian industrial giant Tata with the prospect of up to 3,500 jobs.

The longstanding relationship between Tata and the city's Warwick Manufacturing Group have placed the city in a strong position ahead of decision expected in the next few weeks.

The Tata Group, which has its headquarters in Mumbai ( formerly Bombay), is expected to make a formal announcement about its intention to open a European Technical Centre by mid January.

* What do you think? We want know - get in touch by email, messageboard or by emailing a letter to the editor *

Initial speculation that the company would take over Jaguar's vacant Browns Lane site has been ruled out by Tata, but a spokesman said the new base "was highly likely to be in Coventry".

Tata has taken over a floor at the Warwick Manufacturing Group where they have set up an Advanced Technology Centre.

Recruitment has already begun to initially employ between 50 and 150 graduate designers or researchers to expand on the innovative work already being done at the university.

Nick Matthews, a senior research fellow at Warwick Manufacturing Group at Warwick University, said the organisation had worked with Tata for the last ten years on projects including the Indica small car.

He said: "We know they are looking for a research and development centre in Europe to help all the different sectors of their business.

"I don't know when the centre is likely to be established, and when a decision will be made.

"But this is purely a commercial decision for them to make."

But a London spokesman for the company says it was hoped the Indian car giant - which also has major steel and IT consultancy divisions - would eventually employ more than 1,000 people providing development expertise for the whole conglomerate.

In Mumbai, Ratan Tata, chairman of the group, said: "Though there is no British owned automobile industry, we are really surprised at the level of technology skills in the UK."

He suggested the centre would be able to incorporate ideas from high-tech Britain into the lower-cost aspects of engineering design work in India.

Mr Tata said: "We would create a focal point for technology that would still have a strong connection with India. The idea is to plug into technology at a higher level than is possible in India."

Mr Matthews said: "They want to look to look around the world at what is going on, and combine what is happening in the UK and India and leverage both ends.

"In areas like body engineering, transmissions, gear boxes and final styling they think they can learn from us.

"They would then like to produce them at a lower cost in India."

It is thought Tata could be looking at a campus type arrangement, with separate divisions for each of its divisions as well as automotive.

Mr Matthews said: " Eventually this could lead to a site for 3,500 people. These will be be very high skilled jobs to help improve parts of the company.

"It would also be a sizeable investment and it would great if they came to Coventry."

Louise Bennett, chief executive of Coventry and Warwickshire Chamber, welcomed the news.

"Obviously this is all at a very early stage and there is a great deal of detail still to be determined but this is very encouraging. Tata is a well respected, successful organisation that has ambitions for the European market and must see Coventry's standing in the automotive industry as key to its plans.

"We know that a great deal of work has gone on behind the scenes with the Warwick Manufacturing Group and others, and hopefully it will bear fruit. The automotive sector has taken a few knocks in recent years but hopefully this will be a boost and bring real benefits."