A last-ditch deal to save van maker LDV from going bust has been agreed with a Malaysian firm, with the help of a Government loan of up to £5 million, safeguarding hundreds of job.

Weststar has agreed to buy the Birmingham-based business and invest money into the plant, which has been at a standstill since before Christmas.

The company was due to go into administration tomorrow, raising fears that the 850 workers would be made redundant and the jobs of thousands of employees at other companies would also be lost.

But a deal has been signed with Weststar to buy the entire business, bringing some rare good news for the beleaguered motor industry, which has been battered by the recession.

Negotiations between the company, LDV and Government officials are continuing  to finalise the deal and avoid administration.

Unions warmly welcomed the breakthrough, but said trying to secure assistance to save LDV had been like “pulling teeth”.