A DECISION on where the new Micra will be built has been put back to the new year, with Nissan bosses awaiting the outcome of an EU inquiry into the legality of a proposed £40m grant.

The European Commission this week sent a team to investigate claims by Nissan that it was cheaper to make its Micra at the Renault plant in Flins, France than at Sunderland.

The move comes after the Commission launched a formal inquiry in September into the Government's proposed £40m state aid package.

The Government says the aid is vital to help modernise the Wearside plant to produce the Micra's replacement, and so keep the project in Britain.

The investigation aims to ascertain whether the funding is compatible with EU rules governing state aid to the car sector.

And last night Nissan confirmed the results would form part of its decision-making process on where the new Micra will be built - a decision that could affect at least 1,000 jobs at the North-East plant.

David Swerdlow, corporate affairs spokesman for Nissan said: "The proposed Government grants are an important part of the decision-making process but it is not the only factor.

"We have always said the currency issue, and the need to reduce costs at Sunderland by 30 per cent will come into the equation.

"The grant is an important factor, and the decision on where the new generation Micra will be built has been pushed back to early in the new year."

Brussels has the power to veto any government finance it feels gives a national car industry an unfair advantage over others in the EU.

The offer of a £40m injection would contribute to a total Nissan investment programme at the Sunderland factory of nearly £309m.

Workers have already implemented new working arrangements allowing the company to add a third shift to production in the event of it landing the new Micra.

Along with the jobs at the site, thousands more in the supply industry in the North-East are believed to depend on the Washington factory landing the contract.