GORDON BROWN last night promised that there would be an inquiry into the circumstances that led to the crisis at Rover, including the £40m that the company’s directors have taken out of the firm.

The chancellor and Tony Blair are desperate to salvage something from the wreckage of MG Rover, which went into administration on Friday, to stave off mounting criticism that the government has allowed directors huge “rewards for failure” in order to shore up political support in the region.

Despite the administrators and Blair talking up the possibility of a deal to save parts of the company, any prospects of that seemed slim last night.

Attention is likely to shift to the original Rover deal with the Phoenix consortium, led by John Towers, which allowed its four main directors to benefit so extravagantly from a firm they bought from BMW for only £10 in 2000.

Administrators have been appointed to only two of the 28 Phoenix companies, but City sources said last night it was possible the entire group could collapse, citing recent investigations by Shanghai Automotive Industry Corporation, and the Department of Trade and Industry (DTI) that questioned the solvency of the entire Phoenix group. “There are so many inter-company links that the insolvency of the two main car-making companies could pull the whole lot down,” said one insider.

Last night unions and local Labour MPs tried to present a united front and stopped short of focusing on how much the directors had made. But Brown admitted that an investigation was needed. He said: “There will obviously be inquiries into what has happened in Rover since the deal with BMW.”

Towers and his fellow board members were welcomed when they were given the keys to Longbridge. Stephen Byers, then trade and industry secretary, backed them over the rival Alchemy venture capital group, which would have slimmed the company down into a niche sports car maker.

But the fate of Rover’s 6,100 workers now looks sealed, and coming weeks before a general election could have worrying consequences for Labour. As many as 15,000 jobs could be lost. Richard Cort, chairman of the MG Rover dealers’ association, claimed 8,000 of his members’ jobs were also at risk.

During their five-year stewardship, Towers and his directors — the so-called Phoenix four — have taken more than £40m out of MG Rover. When BMW handed Rover to Phoenix it left them with a £500m cash “loan”, now spent.

Opposition MPs say that the government’s decision to back Phoenix in 2000 rather than Alchemy was driven by political necessity.

The role of Patricia Hewitt, the trade and industry secretary, is also under scrutiny. Julie Kirkbride, the Tory MP whose Bromsgrove seat is close to Longbridge, called Hewitt’s handling of the crisis “grossly incompetent”. She added: “The trade secretary has a lot of questions to answer, not least why she got involved in this announcement last Thursday night. She incorrectly said receivers were being brought in and that was not the case. Shareholders could have a case for suing her or the DTI for forcing their hand.”

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