Rishi lines up another bailout to rescue our biggest firms
CHANCELLOR Rishi Sunak has signed off a new bailout plan codenamed Project Birch to save some of Britain’s biggest companies from the Covid-19 fallout.
The Treasury says ‘strategically important’ firms struggling to get help elsewhere can apply for bespoke loans to tide them over.
The open-ended scheme means many more of Britain’s best-known firms will now be able to access billions of loans backed by the taxpayer. Officials are already in talks with Jaguar
Land Rover, which is seeking in excess of £1billion, airline Loganair and Tata Steel, owner of the Port Talbot works in Wales.
The loans will be prioritised for companies where failure would ‘disproportionately harm the economy’ either by hitting jobs or vital industries such as steel, airlines or defence. The initiative will fill the gap between the Coronavirus Business Interruption Loans (CBILS) and the Bank of England loan scheme, which is only available to investment-grade companies.
It comes amid growing pressure from senior business figures for the Treasury to consider taking an equity stake to avoid companies drowning under a mountain of debt.
The measures, which could be delivered as the UK’s first ever sovereign wealth fund, such as those in Norway or Saudi Arabia, are seen as a way of delivering the Prime Minister’s aim to ‘level up’ the regions.
Lord O’Neill, a former Treasury minister, has suggested that £25billion could be invested in stakes of key companies to protect Britain’s international success stories.
But Treasury insiders said loans would be the first port of call and that taking stakes in businesses would be a ‘last resort’.
One insider yesterday said that such a plan would be ‘a difficult option and quite tricky’
to execute. However, it is estimated the value of Government-backed loans to companies could climb above £100billion, placing companies under huge strain as the UK emerges from recession. It has already reached £40billion in the first two months of the bailout measures.
Alistair Darling, chancellor during the 2008 financial crash, told the FT: ‘Taking equity might be a good thing for the taxpayer to do. If you’re lending money, say to an airline, it’s only right the taxpayer gets its fair share of the success at the end.’
The bailouts will be the first action of its type since the financial crisis when the Treasury took a stake in banks. It was seen as the only way to inject cash into the banking sector but the Government still owns part of the Royal Bank of Scotland.