THE nationalised Lloyds Banking Group and Royal Bank of Scotland will be told by the Government to supply the additional funds that Jaguar Land Rover needs to survive.

A banking source told the Birmingham Post this morning that the group will be expected to put as much as £500 million to help the West Midland carmaker plug the gap in cashflow caused by the recession and credit crunch.

The source said the Government would underwrite the loan as part of its £2.3 billion aid package for the beleaguered British car industry, which has been forced to axe thousands of jobs and slash production levels.

It appears ministers at first had been willing to guarantee only 80 per cent of the advance but now accept that it has to give full 100 per cent backing.

The development follows yesterday’s announcement that the European Investment Bank had awarded JLR a £340 million loan to help finance the development of new, more eco-friendly, cars.

That loan, which will also be guaranteed by the UK Government, will be ringfenced for R&D purposes and cannot be used as part of JLR’s day to day working capital needs.