Britain unveils £2.3-billion loan for car industry

28 January 2009

The UK government announced its long awaited package to support the country's car industry with £2.3 billion loan guarantees to save 200,000 jobs employed directly by automakers and a further 640,000 indirectly, although it falls far short of the £13 billion asked by the Unite union.

Unveiling the auto package, business secretary Lord Mandelson said that car manufacturers will be able to tap up to £1.3 billion of loans from the European Investment Bank, which was offered to UK companies last year and a further £1 billion loan from the Treasury to fund the development of more eco-friendly cars.

He also announced that funds to support training of employees could be hiked up from £65million to £100million if there is demand from car-makers and Mervyn Davies, the new trade and investment minister, will come out with plans to help the financing arms of car manufacturers to get access to funds.

Speaking at the House of Lords, Mandelson said the aid-package to the car industry would halt the slump in car purchase that has put the jobs of thousands at risk and hoped that a "reinvention" of the British car industry would take place.

He added that the package was no 'blank cheque' nor a 'bail-out but a 'significant boost' to the industry, as the car industry was in 'in the frontline of the downturn' and sales had declined 'faster and further than any other sector since the summer' and ''It would be appalling if we would take the downturn, ride out the recession and let a key sector like this go to the wall.''

He however made it clear that the aid came with strings attached and the industry would have to come up with eco friendly vehicles to avail of the loan.