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Support Measures for the Automotive Industry
On 27 January the Government announced a package of measures aimed at freeing up lending of more than £2bn for the automotive industry.
The 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.
The elements of support announced are:
Guarantees to unlock loans of up to £1.3bn European Investment Bank (EIB) guarantees for investment in lower carbon initiatives
Loans or loan guarantees to support of up to £1bn of lending for lower carbon initiatives for non-EIB backed projects
Increased funding for training of employees under ‘Train to Gain’
Additionally, Mervyn Davies, the new Trade and Investment Minister, has been tasked to draw up a plan for improving access to finance for manufacturers’ finance arms.
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.
The measures include plans to agree a temporary framework with the European Commission to provide loan guarantees to UK automotive manufacturers and large UK automotive suppliers. These will be targeted at initiatives to reduce emissions and energy consumption. The new framework will be targeted at investments over £5m from UK based vehicle manufacturers and automotive parts suppliers with an annual turnover of £25m or more. (The Government has already taken a series of actions to unblock bank lending to SME and mid-sized companies.)
The support will help ensure that major new low-carbon investment projects in the UK automotive sector are not abandoned or located outside of the UK because companies are temporarily unable to access sufficient funding from traditional sources of finance.
The 27 January announcement also included a commitment from the Department of Innovation, Universities and Skills that automotive employers will be able to access high quality skills support - and funding to help pay for training - through the Train to Gain service. If there is the demand from the industry, the Department of Innovation, Universities and Skills Secretary will boost the funding to support new training to £100 million from its present £65 million. This offers real help to people – including workers in SMEs in the automotive supply chain.
The £50 million Economic Challenge Investment Fund announced separately on 27 January by the Higher Education Funding Council also creates new opportunities for automotive employers looking to tap into academic expertise in improving business performance. This recognises the value of skills and knowledge that exists in the auto industry and the need to develop Britain’s capabilities in efficient, low carbon processes and technologies. The UK already has a lean, competitive and highly skilled automotive workforce and this training funding will help keep the workforce at the forefront of skills and innovation.
Peter Mandelson has also invited Regional Development Agencies to work with the Technology Strategy Board to bring forward a further step change in programmes for research and development into cleaner engines, lighter cars, plug-in hybrids and components for electric vehicles, building on the £110 million of support for research and development that was announced last September.
Notes
- The Framework will be subject to clearance by the European Commission. The Government will seek approval under the new temporary State aid guidelines announced by the Commission on 17 December 2008. These measures were introduced as a direct response to the access to finance difficulties generated by the financial crisis, and allow Member States more flexibility in providing well-targeted support for companies.
- No date for the commencement of loans and loan guarantees under the framework has yet been set since it is dependent on Commission clearance, which BIS is pursuing urgently. In bringing forward its temporary State aid procedures for helping companies access finance, the Commission has made clear that it will aim swiftly to process Member State applications.
- UK-based manufacturers of construction equipment (such as diggers and bulldozers) and suppliers that meet the criteria of the framework will be eligible to apply.
- 4. The package of measures announced on 27 January will enable lending of over £2bn over the next two years.
Assessment criteria for loans or loan guarantees
The assessment criteria will be finalised when they are cleared with the EU Commission, but are likely to include:
- Value for money to taxpayerCompliance with State aid rules;
- Viability of companies;
- Tied to R&D or capital expenditure within the UK;
- Evidence of having exhausted private sector sources;
- Repayable within 2 years;
- Further UK objectives on low carbon/green technology
Additionally, as noted above, the support will apply to projects over £5m from UK based vehicle manufacturers and automotive parts suppliers with an annual turnover of £25m or more.
Register for information updates
In the first instance, please email the Automotive Unit at the Department for Business, Innovation and Skills (bis.auto@bis.gsi.gov.uk) to register for information updates when these are available.
Do ensure that you provide the following details - business name and address in full, email, telephone and full name of point of contact.
Other Government Support
The Government has already taken a series of actions to unblock bank lending to SME and mid-sized companies in the automotive supply chain and other sectors, details of which can be accessed by visiting Business Link [www.businesslink.gov.uk/realhelp/finance], or on their helpline - 0845 600 9006.