THE GOVERNMENT has drawn up plans to buy and hold stakes in key industries.
The plans, called Project Birch, see the UK government adopting similar state investments into private businesses to France and Germany.
New government project outlines plan to BUY parts in key industries
Whitehall officials are working on similar plans to take stakes in key companies as a “last resort” to prevent bankruptcies.
Experts say Britain could see French and German bailouts for key industries as a model for upcoming rescue packages in the weeks ahead.
The crash in sales from the COVID-19 pandemic makes companies with high fixed costs and low margins highly vulnerable.
These companies will be the ones that the government will look to take stake in first.
An example can be seen in Jaguar Land Rover, which are first in line for a government bailout.
The company is seeking a ÂŁ1 billion loan which could come with convertible elements potentially leaving taxpayers holding a stake in the business.
Sky News reported it is the largest bespoke loan package request from a private company in the crisis.
The company, owned by Indias Tata Motors, is Britains biggest car manufacturer employing more than 38,000 people making luxury Jaguar saloons and 4x4s under the Land Rover and Range Rover brands, such as the new Defender.
Other industries in the UK have been calling for bailouts as COVID-19 wrecks the UK economy.
Energy suppliers have also called for a state bailout as shuttered business customers demand less power while unemployed workers are more likely to be unable to pay their bills.
The airlines industry has written to the Government to ask for a reprieve from planned quarantine measures which would put further pressure on their already strained finances.
The proposals may mean the taxpayer could benefit from any rise in the value of businesses over the years to come, but may also end up holding shares mainly in the most troubled industries.
Unite, the trade union, said the plan is “very welcome”.
Steve Turner at the union said: “There is no more time to lose if we are to prevent a tsunami of job losses from sweeping through communities this summer.”
“If these moves put a financial floor under major employers and their vast supply chains then we have the beginnings of a plan taking shape.”
It would mark a radical change of approach for Prime Minister Boris Johnsons Conservative Government which has so far relied on grants and loans to support companies and jobs.
France and Germany are the models for which Project Birch may take shape in the UK.
Germany’s Government is set to take a 20 percent stake in exchange for a €9 billion (£7.9 billion) rescue of flagship airline Deutsche Lufthansa, while its operations in other countries are also in talks over aid.
Meanwhile the French Government, which already holds a 15 percent stake in the carmaker, has offered Renault a €5 billion loan.
It comes with conditions including joining a battery development project.