Jaguar Land Rover and Bombardier: candidates for a bailout?
France and Germany have earmarked in funds to take equity stakes in some of their biggest companies, said Tim Wallace in The Daily Telegraph. This week, Chancellor Rishi Sunak indicated the UK might follow suit. The Treasury has authorised a state bailout plan – dubbed “Project Birch” – as a lastresort measure to save “strategically important” companies. First up? Very possibly, Jaguar Land Rover, “the jewel in the crown” of Britain’s automotive sector, which employs some 40,000 people and reportedly needs funds totalling more than £1bn. Ultimately, the loan could be converted into an equity stake in JLR, which is owned by India’s Tata conglomerate – setting a precedent for a series of state bailouts of struggling firms.
Sunak’s allies have, for now, played down “the idea that a Conservative government could engage in a massive wave of nationalisation or part-nationalisation”, said the FT. “The preferred option would be to extend loans that ensured the taxpayer was at the top of the hierarchy of creditors.” But pressure is mounting for a “much more radical medium-term plan”, involving the state becoming a part-owner. Former Treasury minister Jim O’Neill (an ex-Goldman Sachs economist) has been leading discussions about creating a public fund – perhaps worth some £25bn – to take stakes in debtridden, but “inherently stable”, businesses.
Another early candidate for rescue might be Bombardier, the company which owns Britain’s biggest “train factory” in Derby, said The Times. But ministers can expect stiff opposition from those warning of the disastrous “grand industrialstyle interventions” of the 1970s. “If deep-pocketed City investors are interested in taking stakes, my advice would be to leave them to it,” said Julian Jessop of the Institute of Economic Affairs. “If they are not, I’d wonder why.”