The Indian conglomerate Tata has snubbed Lord Mandelson, the business secretary, rejecting a 10 million pound loan for a technical centre in the Midlands, the Sunday Times reported.
Quoting senior motor industry sources, the report said the Tatas, owner of premium car brands Jaguar and Land Rover and steel maker Corus, has in the past few days told the government that it does not want the money.
It has decided it can get better terms from commercial lenders, the newspaper said citing sources.
Mandelson had last month announced the loan (10 million), saying that Britain was backing Tatas research into electric cars.
The money was awarded as part of the Automotive Assistance Programme (AAP), a scheme that was designed to help the car industry overcome the worst of the recession and foster investment in new technology.
The 10 million government loan was designed to bolster a 25 million investment by Tata Motors, in its European technical centre based at Warwick University.
The Warwick technical centre was set up in 2005 to develop technology to be used in Tata cars manufactured in India and give the group access to European automotive talent.