Nissan to build new car in Sunderland
Nissan is to build a new compact model, called the Invitation, at its Sunderland factory.
The announcement was made at the Geneva motor show in Switzerland.
The Japanese carmaker said that its £125m investment would create 2,000 jobs. The government is supporting the project with a £9.3m grant.
Nissan said that 400 of the new jobs would be in its Sunderland plant, and it estimates 1,600 jobs will be created in the supply chain.
"When we've looked at the numbers before, it's usually for every one person employed in the facility there is four in the local supply base," Trevor Mann, senior vice-president of manufacturing for Nissan Europe, told BBC News.
Production of the new compact car is scheduled to start from mid-2013.
Nissan plans to build 100,000 of its new Invitation model per year at its plant in Sunderland, where it currently makes about 480,000 of its Qashqai, Juke and Note models per year.
The plant is already the biggest car factory in Britain.
The company said that the Invitation was designed to compete with cars such as the Ford Fiesta and Volkswagen Polo.
It stressed that the car unveiled in Geneva was a concept vehicle, but that the key characteristics and styling were already in place.
"The new car's key USP [unique selling point] will be its fuel economy," said Kevin Fitzpatrick, Nissan's vice-president for manufacturing in the UK.
"It will be fitted with a new generation of engines, which will be built at the plant as well."
The name of the car will also probably have changed before it goes into production.
Business Secretary Vince Cable told the BBC that the news was "a really great announcement".
He added: "It is very positive, but you can't see this in isolation, because the other big car companies have also made major commitments to the UK.
"Jaguar Land Rover, Ford, BMW Mini, are all putting in more money and bringing back supply chain."
The additional investment in Nissan's Sunderland facility will increase its workforce to 6,000, which is a record high for the factory.
The employers' organisation, the CBI, also welcomed the announcement.
"The Nissan Sunderland journey is a remarkable story, demonstrating British manufacturing capabilities at their best - excellent training, a committed, skilled workforce and brilliant, determined leadership," said CBI director-general John Cridland.
Labour leader Ed Miliband said the investment in Sunderland was a result of work done by the last government.
"Government, unions and management worked together, and Peter Mandelson recognised the need for a change in attitude," he told the EEF National Manufacturing Conference.
"We see the response today; the new Nissan investment is a culmination of that approach."