Automotive bailout: Can industry have some more please?

London - The recession-hit UK automotive industry is to get £2.3 billion in freed up lending facilities, particularly for initiatives to reduce emissions and energy consumption. The support for the ultra-lean sector is small money compared to the £100 millions of worth of bailouts and loan guarantees to the disasterous banking sector.

The UK package includes guarantees to unlock loans of up to £1.3 billion European Investment Bank (EIB) guarantees for investment in lower carbon initiatives and loans or loan guarantees to support of up to £1 billion of lending for lower carbon initiatives for non-EIB backed projects. There is also to be extra funding for training of employees under 'Train to Gain'

The support will apply to projects over £5 million from UK-based vehicle manufacturers and automotive parts suppliers with an annual turnover of £25 million or more,  with applications assessed on a case-by-case basis. The scheme is intended to ensure that major new low-carbon investment projects in the sector are not abandoned or located outside of the UK because of financing difficulties.

The UK automotive industry employs nearly one million people from manufacturing to retailing and contributes £10bn added value to the economy. It is a major contributor to research and development, and supports a supply chain and technology benefits for the wider manufacturing industry in the UK. This is in sharp contrast to the prformance of the UK financial sector, where for example the Royal Bank of Scotland is in the red by £28 billion for 2008 - the biggest loss in UK corporate history.

Announcing the new support package, Business Secretary Peter Mandelson said: "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."

But, Tony Woodley, joint general secretary of the Unite trade union, described the majors as "a massive disappointment," noting that at least half of the money will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little for component makers.

Unite is urging the government to learn the lessons of past failures to support manufacturing and begin a programme of emergency support for strategic industries. It is calling for a £13-billion fund to be made available to provide interim relief for producers and to cover employment costs during the crisis period.

"This [automotive industry support package] 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," said Woodley.

"The spectre of redundancy is still hovering over thousands of skilled jobs. We desperately need to see creative action, such as reduced hours with pay losses made up by the state. Support for the credit arms of the car companies is also vital to keep product moving."

Derek Simpson, joint general secretary of Unite added: "While we welcome any support for technological change in the future, this money from Europe is months away. There could be little left of the industry by the time it arrives. Britain needs those factories and skills there for when the economic revival comes if they go, they are gone forever

"The snowball of the economic downturn that was started rolling by the credit crisis will swiftly become an avalanche if the government doesn¹t move to stop it in its tracks. Tinkering around the edges of intervention won¹t achieve anything millions of jobs will still be lost and millions of pounds will be wasted."

Please email your views to patrick.raleigh@centaur.co.uk