Manufacturers welcomed the Government’s pledge to underwrite up to £50 billion of investment in UK infrastructure and exports, as the Chancellor attempts to promote economic growth.
But Ministers must now deliver on the promise quickly and get projects up and running, warned the Midlands branch of the Engineering Employers Federation.
Business Secretary Vince Cable told Ministers that work on an economic growth strategy was continuing, when the Cabinet met in the West Midlands.
Announcing the growth fund, George Osborne said he was using the coalition’s “hard won fiscal credibility” to free up private sector money and kick-start the economy.
The huge initiative comes amid mounting pressure on ministers to support British business by loosening the purse strings. The IMF has again cut the country’s growth forecasts to just 0.2 per cent for 2012.
However, the move will fuel criticism that the British taxpayer is taking on liabilities that the private sector considers too risky.
Under the UK Guarantees scheme, up to £40 billion of funding will be underwritten for critical infrastructure projects that have stalled due to difficulties raising money from private investors.
The Government will charge for helping secure finance for the projects, which could be in sectors such as transport, energy, communications, and education.
Applicants will have to meet criteria including being ready to start construction within 12 months, having a positive impact on economic growth, and giving good value for the taxpayer.
The Government will also step in to ensure major Public Private Partnership (PPP) projects are not delayed. PPP schemes get all their up-front funding from the private sector.
But for the next year the state will lend up to £6 billion to some 30 projects as an “exceptional response to difficult market conditions”.
The loans, funded from departmental capital budgets, will be made on commercial terms, and only for a minority of the overall project cost.
Mr Osborne also announced a £5 billion export refinancing facility would be launched later this year. The sectors benefiting could include aerospace, oil and gas extraction equipment, hospital construction and management services.
Richard Halstead, Midlands Region Director for EEF, the manufacturers’ organisation said: “Investment in infrastructure is a vital element of an effective growth strategy, generating valuable economic activity and making the UK a better place to do business.
“This announcement is a step in the right direction and shows that the government is looking at creative ways to deliver it. But, time is now tight and we need to get shovel ready projects up and running as soon as possible.
"If schemes such as this fail to deliver timely results, the government will need to look again at its spending priorities.
“We must also not lose sight of the bigger picture. To push our faltering economy in the right direction we need a compelling growth strategy that encourages businesses across the board to invest and enter new markets.”
