The LDV factory in Washwood Heath in 1998.

But the Department for Business, Enterprise and Regulatory Reform (BERR) said it believed the buyout was no longer an option.

Instead, it was urgently trying to contact the two foreign companies which have expressed an interest in LDV, to discover what they planned to do with the Birmingham factory amid fears that production could be shifted overseas.

“We are contacting these two potential investors to find out more information about their level of interest in LDV,” said a BERR spokesman.

The business, which has not built any vehicles since before Christmas, has been pressing the Government for a bridging loan of up to £40 million, to restart production and press ahead with plans for a new “green” vehicle.

But ministers have been deeply reluctant to risk taxpayers’ money, as the firm has not been profitable for seven years.

A BERR spokesman added: “The Government has already invested £25 million in this plant, has rescheduled tax payments, and has got agreement for their rent to be reduced.”

BERR officials are to seek reassurances from the potential investors about their plans for the factory.

A source close to the negotiations said GAZ’s concerns about the buyout meant a deal would not be possible in the next few days, but could still take place if the firm was given enough time.