Car giant Jaguar Land Rover has delivered a huge boost to the motor industry by announcing plans to invest £355 million to build low-emission engines, potentially creating thousands of new jobs.

The new facility will be based at a business park near Wolverhampton in the Midlands, creating 750 direct jobs, and many more in the supply chain, with work due to start early next year.

The government, business and union leaders warmly welcomed the news, which marked a dramatic turnaround in the Indian-owned luxury carmaker's fortunes in recent years.

Unions said the announcement followed 18 months' hard work by the workforce, local council and politicians to bring the new plant to the Midlands.

The new engines will be petrol and diesel versions, but JLR said it would not release any technical details, or reveal which models they will be built for.

The Government said it was supporting JLR's project through a grant of up to £10 million, with the plant being sited in one of the new Enterprise Zones set up to boost local growth and attract new businesses.

Deputy Prime Minister Nick Clegg, who visited the company's Solihull vehicle production plant with Business Secretary Vince Cable, said: "Growing our economy has to be the number one priority for Britain, and the Government is not sitting on its hands." 

Mr Cable said: "JLR choosing Wolverhampton for its new engine plant in the face of tough international competition is a tremendous boost for manufacturing in the UK and the West Midlands in particular."

Dr Ralf Speth, chief executive of JLR, said: "We expect the engine manufacturing facility to create up to 750 highly-skilled engineering and manufacturing posts at Jaguar Land Rover, along with hundreds more highly-skilled manufacturing jobs in the supply chain and the wider UK economy. This is truly exciting news and is a major commitment for our company.

"As we invest £1.5 billion a year for the next five years in new product developments, expanding our engine range will help us realise the full global potential of both our Jaguar and Land Rover brands."