Business Secretary Lord Mandelson yesterday gave Airbus a £340 million loan to develop its A350 plane – just over half the cash the planemaker expected.

The announcement was made on a visit by Lord Mandelson to the Filton plant of Airbus UK, where work to design the wings, fuel systems and landing gear for the new plane is under way.

Airbus, which has taken orders for 493 of the A350 jets, had originally asked for the money to help pay for development of the plane, which will start rolling off the production line in 2013, and it employs about 500 of the 5,000 workers at the Filton plant.

But the Evening Post understands Airbus chiefs were told they would receive £600 million, which they originally requested from the Department for Business, Innovation and Skills (BIS), when a delegation from the company met with civil servants in London recently.

Airbus insiders told the Evening Post that management were angry at an eleventh hour decision to reduce the requested £600m to £340m because of constraints on Government spending.

But the Government has denied it agreed to loan Airbus £600m, saying the amount Airbus received was the result of negotiations.

A BIS spokesman said: "The discussions with Airbus were always going to be negotiations and Airbus is really positive about the outcome."

The money will go towards research and development costs, helping prevent the firm from going into the red as it copes with a reduced order book during the world economic downturn.

Described as repayable launch investment, the Government assistance will also help create and sustain more than 5,000 jobs within the supply chain across the UK.

Lord Mandelson said the money was not a grant. He said: "This is not a subsidy, this is an investment.

"The taxpayer will get a strong commercial return for their investment.

"The UK's aerospace industry is world class and drives our ability to be competitive on the world stage.

"This agreement is further evidence of this Government's long-term commitment to the UK aerospace industry and its future success. Aerospace is one of the UK manufacturing's crown jewels, and manufacturing is one of the UK economy's crown jewels."

Airbus will start repaying the cash when the first aircraft are delivered.

Industry sources believe that had Airbus received £600m it would have made the testing process quicker and further eased the pressure on its research budget caused by cash flow problems from cancelled orders and slowing demand for its aircraft.

Other European governments involved in airbus production have also been asked for money.

The Government assistance will create and sustain more than 1,200 jobs at Filton and at Airbus UK's Broughton plant in north Wales.

The A350 XWB (extra-wide bodied) project consists of three planes capable of carrying 270-350 passengers.

The French and German governments have already announced support for the A350 and Spain, the other Airbus partner country, is still in discussions with Airbus.

Tom Williams, executive vice president for aircraft programs, said Airbus was "happy" with Britain's contribution, given "the very difficult financial environment the Government faces today".

He added the UK would remain the company's centre of excellence for wing manufacturing.

Bernie Hamilton, national officer for aerospace and shipbuilding for the Unite union, said: "This investment is a vote of confidence for UK manufacturing and a ringing endorsement of the Government's aerospace strategy.

"It safeguards thousands of jobs across the UK, but in particular it is good news for jobs in Wales and south west England."

But the Government's loan has prompted protests from Airbus's main rival Boeing, which called it a "market-distorting subsidy".

A spokesman for the US-based planemaker said it was "disappointing" that state financing for its European rival was being announced less than three weeks before the World Trade Organisation is due to rule on whether the practice is consistent with world trade rules.

He said: "Since its inception 40 years ago, the Airbus business model has relied on risk-free Government launch aid to develop each of its commercial aircraft. Launch aid violates the WTO subsidies agreement and is a market-distorting subsidy that is unique to Airbus.

"Today Airbus and its parent EADS are sitting on a cash pile of 8.1 billion euros. Airbus clearly has no need of financial support from the taxpayer. Airbus should finance its aircraft development using its own cash and commercial loans, which it has repeatedly said it is able to do."

Airbus in Filton will design the plane's wings, landing gear and fuel systems.

GKN, its manufacturing partner, will manufacture parts for the lightweight composite wings for each of the A350 planes at its new plant at Easter Compton near Avonmouth.