Financial lifeline for UK automotive

Posted on 27 Jan 2009 by The Manufacturer

Business Secretary Peter Mandelson has this afternoon announced details of the long-debated support package for UK car manufacturers, aimed at the “reinvention” of the industry “for a low carbon future".

£1.3 billion of European loans are to be offered to automotive producers and suppliers along with a further £1bn of government lending. In addition, financial support for skills training provided to workers in the industry will rise to £100 million from £65m.

“Today’s measures will provide a specific boost to the industry, providing real help and laying the foundations of its reinvention for a low carbon future,” said Mandelson.

Keen to make clear that this is not a ‘bail-out’, he said the measures do not amount to a “blank cheque” nor are they “operating subsidies” and that he will ensure any support offers tax-payers value for money.

Over the last month the automotive has been rocked by redundancies at the likes of Jaguar Land Rover and Nissan while the CBI reported in its latest Industrial Trends Survey that 90 per cent of British car plants are now running below capacity, due to production shut-downs and short-time hours.

Commenting on Mandelson’s announcement, EEF chief conomist, Steve Radley, said: “This is a long awaited and welcome package which recognises the unique circumstances affecting one of the key sectors of manufacturing.”

He added: “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.”

He went on to warn that while extra finance for training was a positive move, it must be offered flexibly for companies currently operating short-time working for it to be fully effective.

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “This is an important announcement that recognises the strategic contribution of the motor industry and follows 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.”

The SMMT underlined UK automotive’s credentials by pointing out the 27 car and commercial vehicle producers based in the UK make 1.75 million units a year and turn over £51 billion a year between them. Together, they employ 800,000 people and supply over 100 markets worldwide.