Taxpayers to back JLR’S electric car drive
Taxpayers will stand behind loans of half a billion pounds to Jaguar Land Rover, after Britain’s biggest carmaker said it would build electric vehicles in the UK. The guarantee, announced by Theresa May, is being provided by UK Export Finance, the state-backed credit agency, under a new “general export facility” intended to boost exports. It will be used to underwrite a £625million loan facility, with the taxpayer-backed support being used if the carmaker defaults on payments.
TAXPAYERS will stand behind loans of half a billion pounds to Jaguar Land Rover, after Britain’s biggest carmaker said it would develop and produce new electric vehicles in the UK.
The guarantee, announced by Theresa May as she attempts to secure an industrial legacy for her administration, is being provided by UK Export Finance, the state-backed credit agency, under a new “general export facility” intended to boost exports.
It will be used to underwrite a £625m loan facility that JLR has secured with commercial banks, with the taxpayerbacked support being used if the carmaker defaults on payments.
The new loan will ease the strain on JLR’S balance sheet as the company seeks to cut £2.5bn in costs amid sliding sales and the diesel backlash.
The support comes less than a fortnight after JLR, which exports four in five cars it makes in the UK worth £13bn, said it would build a new generation of electric vehicles at its Castle Bromwich factory. It had already committed to making batteries and electric drive units in the UK. That news safeguarded more than 2,000 jobs at the Midlands plant. It had been feared that Castle Bromwich – which builds Jaguar’s poorly selling saloons – could face closure.
Spokesmen for both JLR, which posted a £3.6bn annual loss in May, and UKEF said there was no link between the decision on investment in Castle Bromwich and the guarantee.
“They are completely independent. We are investing to build a sustainable business,” said a JLR spokesman, adding the company’s long product planning cycles meant making decisions based on government support was “impossible”. The new loan facility is expected to be used across JLR, with no single site or area being the focus of the financing.
The support was announced after Theresa May held a summit with car and energy industry leaders at No 10 yesterday, during which the Prime Minister outlined her commitment to keep the UK a leader in the global automotive sector and transitioning Britain to electric vehicles.
The JLR guarantee has inevitably drawn comparisons with backing offered to Nissan following a meeting between by Mrs May and the Japanese carmaker’s then-boss Carlos Ghosn three years ago.
Following that meeting Greg Clark, the Business Secretary, wrote to Mr Ghosn assuring him that Nissan – which has a giant plant at Sunderland – would not be “adversely affected” by Britain leaving the EU.
Despite Freedom of Information requests, government refused to reveal details of letter – which also offered £80m of backing for Nissan’s investments at Sunderland, and the potential for many times that amount – until earlier this year, when the carmaker reversed its decision to add production of a new model to the UK plant.
Prof David Bailey, an automotive industry expert at Birmingham University, said of the JLR guarantee: “This is an example of a much more proactive industrial policy from government than seen hitherto but it does come very soon after JLR’S announcement that it would invest heavily in its Castle Bromwich plant. If government is worried about how it appears [after Nissan] then positioning it as support for exports rather than just handing money over is one way of doing it.”
This is the first time the general export facility – announced in the Spring Statement – has been used. Unlike previous backing offered by UKEF that had to be linked to a specific export contract, the new facility can be provided to help finance processes expected to result in foreign sales, but not with orders already placed.
The Downing Street summit also generated a consultation on every newbuild home being required to have a charging point for electric cars, simplifying the current payment system used at public charging points.