It is hoped the successor to the 206 will be made at the factory

The money will help the company meet the estimated �150m cost of improving its plant at Ryton-on-Dunsmore.

The 206 is made there and the revamp should enable the successor to the model to be produced at Ryton too.

Such grants are usually banned under competition laws but aid is allowed in some cases, for example where specific regions have suffered economically.

Thousands of manufacturing jobs have been lost in the city in recent years, and last week Ford announced it would be ending the production of Jaguar cars at its Browns Lane plant.

The assembly of Jaguar models will transfer to the nearby Castle Bromwich plant, with 400 voluntary redundancies.

In March Peugeot blamed a downturn in the European car market for the decision to abolish a shift at Ryton, with the loss of about 700 jobs.