Press Report : UK offers loan guarantees for carmakers
John Willman, Business Editor, Financial Times, 27th January, 2009
Peter Mandelson, Business Secretary, has unveiled a package of measures to help Britain’s embattled car industry, by offering financial support for the development of low carbon vehicles with new loan guarantees.
The announcement outlined a new guarantee scheme to back £1.3bn of loans from the European Investment Bank, with another £1bn of loans that would not be eligible for such funding.
The package included measures to support training schemes for car workers, help for car parts suppliers and grants for ”green” research and development. However, there was no new support offered for the financing arms of the car manufacturers, for whom the supply of credit used to purchase most cars has dried up.
Lord Mandelson said that Mervyn Davies, the former banker who has just joined the government as Trade and Investment Minister, would be drawing up a plan to improve access to finance.
“This is not a bail out,” he added, saying that the UK industry had been transformed in recent years and that its productivity was higher than France or Sweden’s. “There is no blank cheque on offer, no operating subsidies. It will provide a significant boost to automotive companies, workers and suppliers with a significant boost and accelerate the pace of change in producing green, low carbon vehicles.”
Mr Mandelson offered an increase in the training budget for the industry from £65m to £100m, which he said would help smaller businesses in the automotive supply chain. But this fell short of demands from some manufacturers for the sort of scheme used in continental Europe to support retraining of workers who would otherwise be laid off and require unemployment benefits.
There is no blank cheque on offer, no operating subsidies. It will provide a significant boost to automotive companies, workers and suppliers with a significant boost and accelerate the pace of change in producing green, low carbon vehicles
The Society of Motor Manufacturers and Traders, which will meet Lord Mandelson on Wednesday, warned last week that it was ”battling” for its survival. Paul Everitt, its Chief Executive, said Lord Mandelson’s package was an important announcement that recognised the strategic contribution of the motor industry and followed action in other EU member states, the US and Japan.
“The UK motor industry is productive and globally competitive with a long-term future at the heart of the low carbon agenda. We look forward to discussing the substance of the announcement at our meeting with Lord Mandelson tomorrow.”
Steve Radley, Chief Economist of the EEF manufacturers’ group, said: ”This is a long awaited and welcome package which recognises the unique circumstances affecting one of the key sectors of manufacturing. It will also provide a degree of certainty for their important supply networks which are also integral to other manufacturing sectors.
“The next step has to include short term measures to help companies hold on to workers. While addition funding for training will help secure the skills manufacturing will need for the eventual recovery, this should be linked to more flexible support for companies implementing short time working to tide them through this difficult period.”
Tony Woodley, Joint General Secretary of the Unite trade union, said: “Today’s statement will come as a massive disappointment to the tens of thousands of workers employed in or dependent on this vital industry. Two billion pounds sounds like a lot of money, but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies.
“This is a fraction of the support being given by almost every other government in Europe. Ministers need to more than double the money available, and do so immediately. Make no mistake, we will be continuing to fight for more assistance from government for this industry.”
[Source: Financial Times]
[Editor’s Note: Readers should note that an updated version of this article can now be found at the above link.]