DTI rides to the rescue of Silverstone

The Government is preparing to bail out the motor racing circuit Silverstone with a multi-million-pound rescue package, securing the future of the British Grand Prix.

The Department of Trade and Industry will make the offer within a fortnight. It hopes the money will break the deadlock in talks between the circuit's owners and Formula One supremo Bernie Ecclestone.

A government source said: "If it fits the regional priorities then financial backing will be looked at. The Government is willing to help."

Until now, ministers have refused to offer any direct grants to Silverstone. Instead they have created a £16m fund to sustain Britain's motor sport industry.

But this money won't be used to help Silverstone, and Mr Ecclestone has warned that unless an agreement is reached by 22 August to raise £40m for improvements, the venue will be dropped from next year's F1 calendar.

One source involved in the talks said this threat had "focused minds" and the Government was now prepared to step in to safeguard the 850-acre site.

The DTI will justify the investment by pointing to the economic importance of F1 and the British Grand Prix. The UK is home to six of the 10 F1 teams, including Williams and McLaren. The DTI estimates that the British Grand Prix generates £40m annual expenditure for the UK economy.

A DTI spokesman refused to comment on the rescue package but said: "We would like [the motor sport industry] to flourish as it represents the cutting edge of UK manufacturing. Silverstone is a hugely important part of the industry as a whole."

The Government's support of Silverstone is bound to be controversial, prompting allegations that it is helping out Mr Ecclestone, who controversially donated £1m to the Labour Party.

On top of the Government there are four parties negotiating the future of Silverstone: the freeholder, the British Racing Drivers' Club (BRDC); promoter Octagon, owned by US advertising giant Interpublic; Formula One Administration, controlled by Mr Ecclestone; and the East Midlands Development Agency.

Talks broke down last month after the BRDC rejected a proposal made by Mr Ecclestone that would have seen a reduction in the rent it receives - thought to be £5m a year.

One source involved in the negotiations said that the BRDC was considering raising external finance, to be matched by Mr Ecclestone, to pay for the improvements.