The Government is embroiled in a bitter struggle with the businessmen who banked millions as MG Rover went bust.

The so-called Phoenix Four face being banned from holding office again after a damning indictment by an official investigation which made a catalogue of serious accusations - including that the businessmen gave misleading information to MPs.

Business Secretary Lord Mandelson said work had started to begin proceedings against John Towers, Peter Beale, John Edwards and Nick Stephenson.

He also said they should offer an apology to the 6,300 former Rover workers as well as creditors who lost money.

But the former Rover directors immediately hit back launching an angry attack against the report and the Government.

They issued a statement which said: "The report is entirely as we expected - a witch-hunt against us and a whitewash for the Government.

"It drips with the hallmarks of this Government - spin, smear and point blank refusal to take any responsibility for their own actions.

"We criticised the Government for failing to help MG Rover. As we have seen elsewhere, there is a price to be paid for criticising this Government and for us the price is this report."

They bought the Longbridge-based firm from BMW for a nominal £10 in 2000 and paid themselves £9m each between then and April 2005 when the firm went bust, and also stand to make a further £3.2m each from share schemes and dividends, it was revealed by inspectors.

Lord Mandelson said the Phoenix Four had "brass neck nerve" to describe the report as a witch-hunt and urged them now to "do the decent thing" and formally disqualify themselves from holding any future directorships.