Work has begun on a £60 million underground factory for Rolls-Royce, which will bring more than 350 jobs to Sussex.

The grass-covered complex on 30 acres of farmland at Goodwood, near Chichester, will become the hub of the company's UK manufacturing and administrative operation.

A new-generation Rolls-Royce model, currently being road-tested, is due to roll off the production line in 2003. Output should average 1,000 cars a year.

Original plans for the sunken plant had to be redrafted when environmental inspectors said it could be at risk of flooding.

Project director Karl-Heinz Kalbfell, senior vice president of BMW, said: "This is probably the most unique project in car manufacturing worldwide."

Earth-moving work has begun as part of the first phase of construction of the complex.

The factory will partly be sunk into the ground with its roof covered in plants in an attempt to blend in with the countryside.

It is less than ten miles from West Wittering, where Sir Henry Royce, one of the co-founders of the luxury brand, lived and worked.

Volkswagen bought Rolls-Royce from Vickers in 1998 for £600 million but hands over the rights to make the cars to BMW in 2003.

BMW submitted the planning application for the plant in November. It is has been estimated that the plant will pump about £12 million a year into the Sussex economy.

The Earl of March, who helped broker the decision to build the factory, holds an annual festival of speed at the nearby former Goodwood motor racing track.

Most of the staff will be drawn from the surrounding area which, BMW said, is rich in specialist craft skills used in the yacht and motor industries.

Mr Kalbfell said the region was the most suitable location, close to Heathrow and Gatwick airports.