Britain’s finance chief Rishi Sunak has drawn up a bailout plan to rescue strategically important companies, which could see the Treasury support key industries on a “last resort” basis once all other options have been exhausted.
Under the plan — dubbed “Project Birch — Sunak has increased the Treasury’s capacity to handle bailouts on a case-by-case basis of viable companies, whose failure will “disproportionately harm the economy” if options including the government’s existing loan schemes or shareholder support haven’t worked.
“We have put in place unprecedented levels of support to help businesses get through this crisis. Beyond that, many firms are getting support from established market mechanisms, such as existing shareholders, bank lending and commercial finance,” a spokeswoman from the Treasury said in an emailed statement.
“In exceptional circumstances, where a viable company has exhausted all options and its failure would disproportionately harm the economy, we may consider support on a ‘last resort’ basis. As the British public would expect, we are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer,” the statement added.
Several companies in key sectors including steel, aviation and aerospace are struggling with severe financial difficulties. Some have reportedly already sought state aid to help survive the economic fallout from the lockdown.
Those include Jaguar Land Rover, which has requested a support package of more than £1 billion ($1.2 billion), according to a report by Sky News. The luxury car maker, which is owned by India’s Tata Motors TATAMOTORS, -1.54% and employs 38,000 people in the U.K., saw sales of its vehicles collapse by almost 31% in the three months to the end of March compared with the same period last year.
Virgin Atlantic, which is 49% owned by Delta Air Lines DAL, -2.02%, LoganAir and Tata 500470, -3.22% is discussing with the government what support might be available, according to the Financial Times.
“There is a difference between being approached for support and agreeing to it,” a person close to the Treasury stressed, adding that the Treasury will notify Parliament of the spending that has incurred as a result of any deal.
The Government’s support for business includes paying workers wages through the furlough scheme, deferring tax payments, over £22 billion of government-backed loans and £20.4 billion of corporate financing through the Bank of England.
As of May 19, eight million jobs have now been furloughed with £11.1 billion claimed so far through the Coronavirus Job Retention Scheme (CJRS), according to government data. The Coronavirus Business Interruption Loan Scheme (CBILS) has seen 40,564 loans worth £7.25 billion approved.
Transport Secretary Grant Schapps mentioned “Project Birch” in Parliament last week in reference to the future of the aviation sector.
“There are 43,500 furloughed staff right now from the airlines alone and another 2,600 from airports. I am acutely aware of the job losses and proposed job losses, about which we are very concerned, which is why we have the additional scheme, the Birch process, with the Treasury. Although I cannot go into details of individual cases, for reasons of confidentiality, I can assure the hon. Gentleman that that work is very much ongoing,” Schapps said.