The move would more than double the inmate population at the jail, and could have a similar effect on the 458-strong workforce.

However, Sinn Fein today claimed it would be a blot on the landscape in a popular tourist area.

Sinn Fein MLA Francie Brolly has repeatedly called for the closure of both Magilligan prison and the nearby Army shooting range and again today said the prison would be a blight.

East Londonderry MP Gregory Campbell is a member of the Northern Ireland Affairs Select Committee which will publish its findings on the issue tomorrow.

While the Government had been pushing for a new facility in Ballymena or Craigavon, it is understood the high-level report recommends that due to cost restrictions, the new jail should be built in the North West.

At present, the prison has 458 staff managing up to 452 prisoners.

Mr Campbell, while not wishing to pre-empt the report's publication, said today that a decision to build at Magilligan would signal a boost to the economy of Limavady following November's announcement that US technology giant Seagate will close with the loss of 900 jobs.

Electronics firm Huco Lightronics at Aghanloo is also to shut with the loss of 70 jobs and around 200 posts will also go when the Army leaves Shackleton Barracks in Ballykelly in the New Year.

As well as housing a growing prison population, the work at Magilligan, set to begin in 2011, will signify a massive improvement to the fabric of the crumbling facility.