Government draws up plan to rescue key firms
The UK government has indicated it is prepared to rescue large British companies severely affected by the coronavirus crisis. The Treasury said “last resort” support could be made available if a firm’s failure would “disproportionately harm the UK economy”.
The move follows indications that a number of big firms are seeking government help to survive the crisis. These include Jaguar Land Rover, which is in talks to secure a £1bn loan.
The government has already put in place various initiatives to help companies weather the pandemic, including loan programmes, deferring of tax payments and the furlough scheme, which allows workers to receive 80% of their salary paid by the government.
According to latest figures, eight million workers are covered by the furlough scheme which has been extended until the end of October. But from August, businesses will be expected to meet part of the cost of the scheme. Concern is growing that some big firms are still in difficulties even after making use of these options.
‘Tsunami of job losses’
It could involve the state taking stakes in companies, although extending existing loans would be preferable. Unite the union welcomed the plan but urged the government to act quickly.
“There is no more time to lose if we are to prevent a tsunami of job losses from sweeping through communities this summer,” said Unite assistant general secretary for manufacturing, Steve Turner.
“We still need to ensure that proposed changes to the job retention scheme do not undermine a plan to recover and rebuild and that workers continue to get their wages.”
A Treasury spokeswoman said: “We have put in place unprecedented levels of support to help businesses get through this crisis.
“Beyond that, many firms are getting support from established market mechanisms, such as existing shareholders, bank lending and commercial finance.
“In exceptional circumstances, where a viable company has exhausted all options and its failure would disproportionately harm the economy, we may consider support on a ‘last resort’ basis.
“As the British public would expect, we are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer.”
The BBC understands the Treasury would have to notify Parliament of any spend incurred, and although companies might seek financial assistance, this does not mean such support will be given.
Companies in trouble
On Saturday, Sky News reported that Tata Steel, Britain’s biggest steel producer, had approached both the Welsh and UK governments for financial aid that could run into hundreds of millions.
Earlier this week, Welsh MP Stephen Kinnock told parliament that Tata Steel, which owns the steelworks in Port Talbot, needs around £500m in order to survive the pandemic.
And according to the Financial Times, aviation industry bosses have been asking the government for a “long-term investment facility” that would help to support supply chains.
Jim O’Neill, former Treasury minister and ex-chief economist at Goldman Sachs, told the newspaper he had been in discussion with government officials about creating a public sector-owned funding body to take stakes in firms that would be “inherently stable” in times of normal economic activity.