JLR in line for £270m European Investment Bank loan - but the deal is not yet done and the British government still needs to stump up cash as well.

In a revealing interview recently with Marc Reeves at the Birmingham Post, the head of JLR's owner Tata, Ratan Tata, said that the effect of the global downturn would be 'devastating' unless the British Government coughed up some £500m in loan guarantees.

Ratan Tata argued - correctly - that JLR is not looking for a bailout but rather needs the money as working capital, noting that bank funding is now hard to come by.

The EIB is expected to also agree tomorrow a package for Nissan's plant in Sunderland, which will receive some of a £364m loan to be split between Nissan's plants in Sunderland and in Spain. This will also require a government guarantee, and both JLR and Nissan will need to commit to greater investment in sustainable technology.

As the Post has frequently highlighted, JLR has been asking for help from the Government since last November. Despite Lord Mandelson, the Business secretary, putting aside £2.3bn in support for the UK car industry, talks between the auto industry and ministers have not progressed as well as the company - or it seems Lord Mandelson - had hoped.

In a typical display of the government's inability to grasp the situation facing the car industry in general and JLR in particular given its huge R&D spend, a spokesperson for BERR said that "the primary responsibility for short-term financing or longer-term restructuring rests with the parent company".

That's right but BERR was saying the same thing five months ago, and it also seems to overlook the problems faced by Tata - which has invested hundreds of millions in JLR since buying the firm - in trying to raise finance as the global credit crunch bites.

The assistance package unveiled by Mandelson in January included £1.3 billion to be used to guarantee the EIB loans. JLR continues to discuss with the government access to part of the other £1 billion. That support is vital for JLR to help its cash position in what is the worst crisis afflicting the auto industry since the Second World War.

Figures out today showed that March car sales in the UK were down by over 30% compared to the same time last year - yet another dismal month. Car production in January and February was down by 50 - 60% compared to a year ago.

The case for financial loans and loan guarantees for JLR is strong. The firm has an outstanding product pipeline and is investing heavily in R&D and new environmental technologies. The firm is the seventh largest R&D corporate spender (in any industry) in the UK and in the top 150 firms worldwide.

The firm generates some £1.3 billion a year in national insurance, PAYE and VAT, and employs some 14,000 workers directly and another 60,000 indirectly.

JLR made a strong operating surplus in 2007 and the first half of 2008, and Jaguar sales have boomed on the back of strong XF and XK sales. A stunning new XJ is scheduled for launch later this year.

It should be stressed that this is not a 'bailout' as much of the press have inaccurately suggested. The firm is fundamentally strong and the loans and loan guarantees are at commercial rates.

We are not talking about a GM or a Chrysler 'lame duck' but rather a firm that has already restructured and which is investing heavily in new environmental technologies, including - hopefully - Land Rover's lightweight hybrid-powered LRX concept car (on which the go-ahead has yet to be confirmed).

Whilst the IEB news is welcome, the deal is not yet signed and sealed and the continued lack of progress on a wider package of UK government support for JLR and the UK auto industry is disappointing, and in stark contrast to speedy action by other governments.

The EIB loan does not get the British government off the hook. The latter needs to act, and quickly.

David Bailey is Professor of International Business and Economic Policy at the Birmingham Business School and Chair of the Regional Studies Association.