A £20M deal to keep the Plaxton coach works in Scarborough open, has been rubber stamped.

The deal will keep 200 of the site's 700 employees in work, but the remaining 500 will be made redundant in August, when the plant closes for its summer shutdown.

The grant will help to streamline production facilities at the factory.

The news is a relief to the remaining workforce which have been working in the shadow of the axe since May, when there were fears that operators TransBus could close the Plaxton site altogether.

However, Transbus parent company Mayflower Corporation has agreed to invest £20m in the plant, saving the 200 jobs.

Negotiations have been completed between the Transport and General Workers Union (TGWU) and the company to identify the employees marked for redundancy.

Brian Davidson, managing director of Transbus Coach, said the investment plan will transform Plaxton into an ultra-modern coachbuilding factory.

He said "Exciting times lie ahead. The commitment shown by TransBus and the trade unions, convinces me that we can take this business on to a new level".

Tony Woodley, national secretary of the TGWU, said: "We knew after the initial announcement that the best we could expect was a damage limitation.

"We have been successful in that. Maintaining the fabric of the plant was crucial for the community and for the future of coachbuilding in Scarborough."

Last month, Scarborough Borough Council was awarded a £160,000 grant from the Government to help retrain the workers made redundant at Plaxton.

The money is a result of a task force set up to tackle the crisis.

Its members include the council, the regional Government office, Yorkshire Forward, Employment Services, Government agencies, the Transport and General Workers' Union and TransBus management.

The area has also been included in the Government's Enterprise Grants Scheme, which pays businessmen about £75,000 towards the cost of starting up a new business

The ordering season for coaches is about the get into full swing, and Plaxton expects to build about 200 coaches in the next year.

However, minibus production has been transferred to TransBus's other plant in Falkirk, Scotland.

The job losses at Plaxton follow a review of all seven TransBus manufacturing sites in the UK.