The Government and motor industry leaders are to collaborate on finding solutions to the crisis that yesterday claimed a further 850 casualties among workers in the West Midlands.

A delegation led by the Society of Motor Manufacturers and Traders (SMMT) had talks yesterday with business minister Lord (Peter) Mandelson aimed at heading off a potential collapse of vehicle-building in the UK.

It followed months of plummeting sales, production levels, short-time working, shift reductions and shut-downs at virtually every factory.

The scale of the problem was underlined yesterday when Jaguar Land Rover, which is already laying off 600 full-time workers, announced the loss of 850 agency staff at its sites across the region.

Termination of the contracts will see JLR’s usual complement of 1,700 agency staff, who work mainly in engineering and IT, slashed by half.

SMMT chief executive Paul Everitt said the meeting with Lord Mandelson and business minister Ian Pearson had been “open and constructive”.

Mr Everitt said: “The industry outlined the scope and scale of the challenges it faces and the unprecedented difficulties in the market place.

“We emphasised the urgent need to address liquidity and restore demand and discussed a variety of measures to address these challenges.

“Government and industry have agreed to explore collaboratively a range of solutions in a timescale that matches the urgency of the situation.”

Mr Pearson (Lab, Dudley South) said: “We had a very successful meeting with the motor industry, not just the vehicle assemblers but right through the supply chain.

“They very much welcomed the fiscal stimulus measures we set out in the pre-Budget report.

“They were also supportive in terms of what we are doing with the £7?billion package for industry, helping small firms in the supply chain get access to loans and credit. They very much pushed us when it came to saying the big issue for them was fast access to credit.

“We recognise that it is a difficult time for the motor industry. There are a number of difficult issues.”

Asked whether there had been discussions about Jaguar’s reported plea for a £1?billion bail-out, which the carmaker has neither confirmed nor denied, he said: “We cannot comment on speculation.

“What is quite clear is that the motor industry right around the world is facing problems. It is a result of the fact that people aren’t buying more cars at the moment.

“We need to help people in the supply chain borrow, and make sure that banks continue to lend to industry in the future. Lending issues were high on the agenda.

“The problem they have is that people are not buying cars at the moment - there is no confidence in the market.”

Asked if ministers were considering a state-guaranteed credit facility, Mr Pearson replied: “We will look at all options. We want to put pressure on the banks to make lending available.”