The European Commission said yesterday that it was unlikely to approve a government grant to Ford's Bridgend plant in South Wales which employs 1,420 people. It also announced an inquiry into the £17.4m subsidy.

The money is part of a £250m investment package over three years aimed at increasing engine production by 325,000 a year, a move which Ford estimates will create 600 new jobs.

The commission said it doubted whether the aid could be justified and questioned Ford's claim that the investment could have gone to a plant in Cleveland in the US.

Brussels said it was disingenuous to talk about Cleveland since V6 and V8 engines to be produced at Bridgend are earmarked for the Ford, Jaguar, Land Rover and Aston Martin brands and will be assembled in Europe not the US. It also accused the government of not comparing like with like since the cheaper American solution involved outsourcing much of the work whereas the UK option involves purely in-house production.

Ford appeared unflustered, saying "It is not unusual for the EC to conduct further enquiries into state funding prior to approval."