A company has moved closer to developing the first biodiesel engine to power a top racing car.

Scott Racing Limited, based in County Durham, has built an engine test cell that allows race engines to be tested at up to 10,000rpm and 800 horse power - more than seven times the power of an average family car.

Tests are being carried out at the company's new premises in Langley Moor, and a spokesman said the firm was now moving significantly closer to using biodiesel to compete at top UK race circuits, including Brands Hatch, Croft, Donington Park and Silverstone.

Managing director Tim Scott, who is leading the five-man project team, said they were hoping to race a biodiesel-powered car in next year's British Touring Car Championship (BTCC).

"The engine test cell represents an exciting investment for us and is essential to developing a competitive race engine. It also allows us to offer fuel and engine performance testing services to other companies," he said.

"Most of the existing cars run on petrol with a few on bioethanol - no one has yet run a fully-biodiesel powered car because, technically, it is much more challenging.

"I'm passionate about motor sport and would like to see it become more environmentally-friendly. I think we can make a diesel car competitive in the short-term and gradually ramp up the percentage of biodiesel in the fuel and be competitive in a 100 per cent biodiesel powered touring car next year."

One NorthEast has backed the project with a £62,000 Department of Trade and Industry grant for research and development.