The owner of Vauxhall has announced that it plans to close its van factory at Luton, in a decision that will put 1,100 jobs at risk of cuts or moving location.

Stellantis said it would shift van production from Luton, Bedfordshire, to another factory at Ellesmere Port, Cheshire, blaming the UK’s economic conditions and the government’s zero-emission vehicle (ZEV) mandate.

The decision is a bitter blow to the UK car industry, as carmakers around the world struggle with slower demand and intense competition. Ford last week said it would cut 4,000 jobs in Europe, including 800 in the UK, while Volkswagen is preparing to cut three factories in Germany for the first time.

The Luton Stellantis factory employs 1,100 people. Stellantis said several hundred new jobs would be added at Ellesmere Port in order to cover the increased production there. Some workers at Luton will be able to move to Ellesmere Port.

Stellantis said the shift would result in “greater production efficiency” for its vans at a site with space for expansion. The move will also include a £50m investment in Ellesmere Port to ready it for increased production.

Workers at Luton were informed of the decision on Tuesday. It comes less than a year after Stellantis pledged the Luton site would produce medium-sized electric vans for the Vauxhall, Citroën, Peugeot and Fiat Professional brands.

Stellantis has repeatedly warned of possible UK factory closures. Last year it said it would come under threat if tariffs were imposed on UK-EU trade, while in June Stellantis’s former UK boss, Maria-Grazia Davino, said factory closures were a possibility if the UK government did not step in to help the industry.

The move will be a blow to the UK government, which is preparing to relax the ZEV mandate after sustained lobbying by the car industry. The business secretary, Jonathan Reynolds, is due to address industry executives at a dinner on Tuesday evening.

Keir Starmer’s spokesperson on Tuesday announced that the government would bring forward the consultation on the mandate that will look at changes to the rules that impose fines of up to £15,000 per petrol or diesel vehicle sold above a quota.

The government is likely to stick firmly to its goal of phasing out new petrol and diesel car sales from 2030, and all hybrids by 2035, according to a person with knowledge of internal discussions.

The person said the government was also very likely to stick to headline targets mandating that sales of electric cars must account for 22% of new sales in 2024 for each manufacturer, rising to 28% next year and 80% by 2030, despite reports they could change.

However, the government will consider changes to “flexibilities” that effectively allow carmakers to reduce the number of electric cars they need to sell.

Those loopholes include the ability to “over-comply” in later years to make up for a slow start in the coming two or three years, and lowering the average emissions of the fossil fuel cars they sell.

The “fast-track” consultation is expected to launch before Christmas, before reporting back in the first few months in 2025 – faster than most policy consultations of that type. It is also expected to include details of which hybrid cars can continue to be sold after 2030.

A UK government spokesperson said: “While it’s encouraging to see Stellantis investing in the future of its Ellesmere Port plant, we know this will be a concerning time for the families of employees at Luton who may be affected.

“We have a longstanding partnership with Stellantis and we will continue to work closely with them, as well as trade unions and local partners on the next steps of their proposals.”

Carlos Tavares, Stellantis’s chief executive, had heavily criticised the ZEV mandate, including last month warning that the company would make a “correction” in response. Tavares – whose stable of brands ranges from Fiat and Chrysler to Jeep and Citroen – is known within the industry for pitting factories in different places against each other in order to push for the most efficient production. However, the company has overcapacity across Europe.