Firms which used to supply MG Rover are starting to lay off workers in increasing numbers following the collapse of the car group, threatening fresh job losses sparked by the crisis, it emerged last night.

Manufacturing officials said about 1,200 workers were facing redundancy in firms across the West Midlands as well as the 5,000 who have lost their jobs at Longbridge in Birmingham.

The Engineering Employers Federation said a number of firms were being forced to announce "fairly sizeable" redundancies after Rover went into administration.

Supplier firms were owed at least two months money from MG Rover, it is believed.

The European Commission yesterday offered fresh cash support for the West Midlands to soften the blow of the job losses at MG Rover.

The Commission has already contributed £625m to the region from EU spending programmes, some of which may now be redirected to offset the effect on local industries of large-scale redundancies.

A team of EU experts are now talking with Government officials about injecting more EU grants and loans into the area to boost an emergency aid package being assembled in London.