One week after the firm went into administration, MG Rover workers last night faced a Catch 22 situation which threatens further Government money to pay their wages.

A second £6.5 million loan from the Department for Trade and Industry (DTI) will be needed on Sunday to keep the carmaker alive for another week.

However, administrators PricewaterhouseCoopers are legally prevented from accepting fresh debt unless there is a realistic chance of Shanghai Automotive Industry Corp (SAIC) or any other bidder buying the company.

The Chinese have ruled out dealing with the MG Rover while it remains in administration.

If the company has no immediate prospects, administrators could not accept the extension which would deplete the company's assets and harm existing creditors.

The DTI last night admitted future loans were dependent on a " reasonable prospect of reengagement with SAIC".

The 6,100 workforce was paid on Wednesday night, thanks to the first DTI loan announced last Sunday, but remain in "limbo" and unsure if another pay packet will appear.

It is believed union officials were last night urging the DTI to make further funds available.

This week the administrators revealed the carmaker is losing between £20-25 million a month.

Earlier yesterday, reports suggested the Government had set aside £25 million to keep the car maker afloat for three weeks until after the General Election on May

5. Describing the report as " speculation", a DTI spokeswoman told The Birmingham Post: "No decisions have been made on further funding.

"We are monitoring the situation and will continue to review the adequacy of the funding available while there is a reasonable prospect of re-engagement with SAIC."

Critics last night called on the Government to be "straight" with the workforce and stop giving them "false hope".

The Conservative Party's Industry spokesman Stephen O'Brien said: "If the Government were to use taxpayers' money in a cynical way to fund Rover when there is no real prospect of a viable deal to save the company, it would be a cruel deception of the workers at Longbridge and it would also raise questions about the proper use of public money."

Bob Michaelson, chairman of the West Midlands Institute of Directors, said: "Cynics would say that this money is being offered purely because of the election and I am genuinely concerned that those workers are being fed false hope."

A spokesman for the T&G union last night held out hope that a deal with Shanghai can still be brokered.

"The Government would clearly not make the funding available if the deal was very definitely dead but, contrary to reports, Shanghai have not said 'no'.

"I wouldn't over-egg the pudding but there is still some hope there."

A spokesman for PricewaterhouseCoopers confirmed the current Government loan runs out on Sunday.

Liz Hanks, the wife of a Longbridge paint shop worker, said: "We are being kept hanging on and we just want to know what is definitely happening so we can start planning for the future.

"Obviously my husband is keeping his eye open for jobs but we are in limbo."

Meanwhile, an emergency summit will be held tonight to help beleaguered suppliers owed an estimated £200 million by MG Rover. The meeting, which has been organised by Birmingham Chamber of Commerce and Industry comes as more companies report severe financial difficulties following MG Rover's collapse.