No emergency funding for Jaguar Land Rover

Emergency funding talks between Jaguar Land Rover, sister company Tata Steel and the UK government, which may have led to British taxpayers owning stakes in the car maker and metals group, have ended. This means both companies will have to rely on private financing to overcome the impact of coronavirus on business.

The Treasury concluded that Indian conglomerate Tata Group (who own JLR and Tata Steel) did not qualify for taxpayer support and that the emergency financing scheme, Project Birch (a bailout plan to rescue companies that are seen as strategically important), imposed strict conditions on any lending, which meant the scheme was infeasible for Tata. JLR was also unwilling to meet requirements to decarbonise its fleet further in order to obtain financial support. The requirements would have forced them to significantly accelerate its programme of vehicle electrification and phase out diesel cars – which make up the majority of their sales.

Both businesses remain in talks with government over other areas of potential support. JLR, which lost close to £1 bn between January and July, is in need of significant support. It was excluded from the Bank of England’s finance support scheme because of its poor credit rating, making it expensive for the business to borrow money on the open markets. In June, the carmaker’s Chinese subsidiary raised £560 m from a group of Chinese banks, and the chancellor Rishi Sunak insisted that only companies that had exhausted all other options – including raising capital from existing investors – would be eligible. He has also indicated he does not want to end up taking taxpayer stakes in a large number of troubled companies and that the government would only act to rescue individual companies if their failure would disproportionately harm the economy. Things don’t look too good for JLR.