NISSAN last night played down claims that 12,000 jobs could be lost if its North-East plant fails to secure investment to build a new model.

Yesterday MPs were warned the prospects of the Japanese giant's Micra replacement being built in Sunderland are being undermined by the continuing strength of sterling against the euro.

Nissan UK managing director John Cushnaghan, giving evidence to the Commons Treasury Select Committee, said uncertainty over the exchange rate was making it harder to argue the case to locate production in Britain.

Manufacturing industry had "a great potential for decline" if Britain remained outside the euro, he warned.

He also called on the Government to raise the debate on the arguments surrounding British membership of the single currency from its present "superficial" level.

His comments come at a time when Nissan is considering whether to build the new Micra on Wearside or at the French and Spanish plants of its new partner, Renault.

The Micra currently accounts for a third of the 330,000 cars built each year at Sunderland, where 5,000 are employed.

More than 20,000 jobs in supplier and other related firms also depend on the health of the plant.

Mr Cushnaghan said the exchange rate would be one of the issues the Nissan board in Tokyo would consider when it came to make a decision on the new Micra.

"From my own experience, it is getting much more difficult to make our case for investment," he told the committee.

"I am finding it increasingly difficult to make the case for the plant for which I am responsible, predominantly because of the exchange rate situation."

Mr Cushnaghan said Sunderland would have to cuts costs by 25 per cent to make it a competitive site for the Micra, even without the "handicap" of the exchange rate.

It was "wise and sensible" to eliminate one of the main risks facing business - fluctuations in the exchange rate - by joining the single currency, he said.

"The environment we want to see is stability and stability, we believe, is best served by being in one currency," he said.

He warned that the prospects for UK manufacturing industry were distinctly uncertain if Britain did not join the euro.

''There is a great potential for decline if we stay outside and a great potential for growth if we are inside,'' he said.

Afterwards a Nissan spokeswoman dismissed reports that 2,000 jobs were at risk at the plant, with 10,000 more on the line among suppliers.

"At no point have we talked about job cuts because we are still confident of winning the new investment," she added