Mandelson’s automotive support

Posted on 30 Jan 2009 by The Manufacturer

Peter Mandelson's speech to the House of Lords from Tuesday...

Photo of Peter Mandelson, Copyright World Economic Forum ( by Annette Boutellier

“My Lords I want to make a statement on the Government’s plans to help the British automotive industry weather the downturn in the global economy.

The automotive industry – with its near one million employees from manufacturing to retailing and £10 billion added value to the economy – is in the front line of the downturn, with output falling faster and further than any other sector since the summer.

We need to counter this to prevent an irreversible loss of capacity, skills and technology. The health of the automotive industry is vital to the strength of manufacturing in Britain and is at the heart of many of our regional economies.

The industry and its supply chain will benefit from the measures that the government has already taken to boost the economy. These include the VAT cut that saves consumers hundreds of pounds when buying a vehicle. And Government guarantees that secure £21 billion in new and existing credit lines and lending for businesses, many of them in the automotive industry supply chain.

But I recognise we need to do more. 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.

This industry is not a lame duck and I am not proposing a bail-out. It has been transformed over the past decade. Productivity has risen, catching up and overtaking both France and Sweden. In Britain today, we have some of the world’s most productive car plants.

For the future, Britain needs an economy with less financial engineering and more real engineering. The car industry can and should be a vibrant part of that future.

The steps we are taking today will help companies speed their way to becoming greener, more innovative and more productive. This is the route to securing jobs for the long term as we build a more balanced economy for Britain’s future.

The world’s car industry is at a turning point. In Britain, we need to be at the leading edge of the development of low carbon vehicles and green manufacturing. This offers a major business opportunity for us. But this greening of the industry needs investment in plant, research and development.

Today, I can announce that to back that investment we will provide loan guarantees to Britain’s auto manufacturers and large suppliers.

First, we will offer guarantees to unlock loans of up to £1.3 billion from the European Investment Bank.

Second, we will offer guarantees to support up to a further £1 billion of lending, or loans where appropriate, to cover worthwhile investments not eligible for EIB support or which will bring special value to Britain.

Applications will be assessed by us on a case by case basis. There is no blank cheque on offer, no operating subsidies. We are committed to ensuring that anything backed by the scheme: offers value for taxpayer’s money; enables us to green Britain’s economic recovery; delivers significant innovation in processes or technologies for the long-term supports jobs and skills in Britain

To support these aims, the Government will build on its programmes that are currently supporting the automotive industry. To further strengthen the sector’s skills, we are increasing funding for training of employees.

We have already developed a package to tailor the Government’s “Train to Gain” programme to meet the automotive industry’s specific needs. If there is the demand from the industry, my Right Honourable Friend the Innovation, Universities and Skills Secretary will boost the funding to support new training to £100 million from its present £65 million. This offers real help to people – including workers in SMEs in the automotive supply chain.

The £50 million Economic Challenge Investment Fund being announced separately today by the Higher Education Funding Council also creates new opportunities for automotive employers looking to tap into academic expertise in improving business performance.

Earlier this month, my Right Honourable Friend the Transport Secretary, announced the provision of £250 million to support consumers switching to ultra low carbon cars. But we want the car industry in Britain to meet that demand for low carbon cars.

So alongside our loan guarantees for the greening of the industry, the next element of today’s announcement, is that I am inviting the Regional Development Agencies to work with the Technology Strategy Board to bring forward a further step change in our programmes for research and development into cleaner engines, lighter cars, plug-in hybrids and components for electric vehicles. This will build on the £110 million of support for research and development that was announced last September.

We are looking at steps to improve car company financing arms’ access to additional funding. The finance arms play an important role in providing the credit that keeps the industry functioning. I have tasked the new Trade and Investment Minister, Mervyn Davies, to draw up a plan for improving their access to finance, a task to which he will bring considerable experience and expertise.

Taken together, today’s announcement will provide our leading automotive companies, their workers and suppliers with a significant boost. It will also ensure that the downturn does not derail the investment in innovation and change needed to make Britain a world leader in the development and manufacture of low carbon vehicles. This is both an economic objective and an environmental imperative.

The automotive industry knows that it must change to succeed in this new world. It has to be cleaner and greener. The government knows this is an important national objective, a key to building a competitive and balanced economy.

Within the resources agreed in the Pre Budget Report and the provision made then for such contingencies, we are determined to counter the credit crunch, counter the recession, create a level playing field for the industry and build Britain’s low carbon industrial future. We will take, as a Government, whatever action it is possible and appropriate for us to do and I commend this statement to the House.”

Reaction from the manufacturing community will follow…