A multi-million pound deal has been agreed to save 200 jobs at Plaxtons coach builders in Scarborough.

But TransBus International, the firm's parent company, said 500 jobs would still go at the end of July.

The £20 million investment deal will see Plaxtons transformed into a state-of-the-art coachbuilding factory, called New Plaxton, which should be fully operational by October.

It will have about 50 office staff and 150 shop floor workers, producing about 200 buses a year. The managing director of the new operation, TransBus Coach, will be Brian Davidson, 38.

He said: "Exciting times lie ahead. The commitment shown by TransBus and the trade unions convinces me that we can take this business on to a new level."

The deal follows a shock announcement in May that Plaxtons would close down completely with the loss of 700 jobs.

Tony Woodley, national secretary of the Transport and General Workers' Union, said: "We knew after the initial announcement that the best we could expect was a damage limitation. We have been successful in that. Maintaining the fabric of the plant was crucial for the community and for the future of coachbuilding in Scarborough."

Scarborough MP Lawrie Quinn, who played a key part in master-minding the change of heart by TransBus, said: "This announcement is a starting point for a new Plaxton. A lot of people have got to work together to build on this start.

"I want to ensure that not only do we have a first-class coachbuilding business in Scarborough but that we can make sure extra jobs can come off the back of it. It is a catalyst for the Scarborough economy."

Trade Minister Alan Johnson welcomed the securing of 200 jobs.

He paid tribute to the work of the Scarborough Economic Prospects Task Force, which was set up to develop an action plan in response to the major restructuring exercise by Transbus.

"I commend the work of the Task Force and Transbus in securing a future at the site," he said.

"This was made possible by the determination of all interested parties to work together in the interest of the local community.

"I regret that other jobs are being lost. I will ensure that the Employment Service, Government Office and other agencies will do all they can to assist those who have lost their jobs."

He added that £160,000 had been made available to provide support for those who were made redundant.

Updated: 10:24 Thursday, June 28, 2001