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Jaguar Land Rover slashing 1,000 jobs and relocating 350 staff should set “alarm bells ringing” in government over its policy towards diesel, according to unions.

Britain’s biggest car maker briefed staff about the cuts on Monday, confirming reports last week that it was reducing production as sales slump.

JLR is not renewing contracts of 1,000 agency staff and moving permanent employees between plants as it reorganises in the face of falling sales.

Last week the company – which has about 40,000 staff – attributed the move to “continuing headwinds impacting the car industry”, though insiders hinted Government policy towards diesel was the main driver.

Union Unite urged the Government to reconsider its policy towards diesel in light of the job losses.

Des Quinn, the union’s national officer for JLR, said: “It should be a wake-up call for ministers and have alarm bells ringing in the highest levels of Government. Confusion over diesel cars prompted by badly thought through ministerial announcements [is one of] the major factors behind this.”

Ministers have introduced new levies on the sale of new diesel cars in an attempt to dissuade motorists from buying vehicles driven by the fuel.

The Government believes diesel produces more nitrogen oxides (NOx) pollution than petrol – something strongly denied by the industry. Car makers say the latest diesels have the same NOx emissions as petrol and produce less carbon dioxide.

Diesel’s market share has plunged in the UK in light of what the car industry describes as the “demonisation” of the fuel.

Official data showed that last year diesel made up 42pc of the new car registrations in the UK, down from 47.7pc in 2016. The most recent industry data from March showed a 37.2pc market share for diesel.

JLR is disproportionately hit by falling diesel sales because about 80pc of the cars it sells in the UK – some 118,000 last year – are powered by the fuel.

Economic uncertainty related to Brexit has also hit sales, as motorists rein in spending.

Ralf Speth, chief executive of JLR, hinted at the problems the so-called “demonisation” of diesel was causing the country a fortnight ago, in an exclusive interview with The Telegraph at the New York car show.

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