Business Secretary Peter Mandelson is expected to announce plans for a £20 billion loan scheme to help small and medium sized businesses obtain credit.
But Downing Street said the measures would be aimed at small and medium-sized firms - apparently ruling out carmaker Jaguar Land Rover, which has asked for urgent credit facilities from the Government.
Smaller firms in the automotive manufacturing supply chain might benefit from the measures, which were welcomed by employers last night.
Steve Radley, Chief Economist of the Engineering Employers’ Federation, said: “This package goes some way to kick-starting credit markets and helping business access the finance they need.
“By underwriting loans, the government scheme could provide welcome breathing space for firms faced with cash flow problems after credit markets dried up.
“With a framework soon to be in place, businesses will be looking to Banks to follow the government’s lead by restarting the flow of finance.”
Ministers are believed to be considering a loan guarantee scheme worth as much as £20 billion, with the state offering to “insure” banks against firms defaulting, in return for a fee.
Speaking in Downing Street, Gordon Brown’s official spokesman said: “Our scheme will be targeted, it will be thought through, it will be funded and it will be focused on those businesses that we want to support most of all.
“That in particular is small and medium sized businesses which are viable but are having difficulty accessing working capital at this time.”
The spokesman added that the Government was not proposing to offer “irresponsible blanket guarantees” for all business lending.
If confirmed, the plan would be similar to one endorsed by the Tories - although they have called for a £50 billion commitment.
Lord Mandelson said: “I want to make sure that when we intervene, we intervene in a way that is really effective, really targets genuine business needs in a way that gives value for money from the Government and the taxpayers’ point of view, and is genuinely going to help businesses in what is a very difficult credit situation,” he told reporters following this morning’s Cabinet meeting in Downing Street.
“I’m going to deliver real help which targets real need which is going to make a real difference. I’m going to announce that during the course of this week.”
Shadow chancellor George Osborne said the Government appeared to be offering a belated version of a £50 billion loans guarantee scheme floated by the Tories several weeks ago.
But Liberal Democrat Treasury spokesman Vince Cable said: “The Government should stop messing around with stunts and wheezes and ensure that the banks owned or part-owned by taxpayers operate as state banks maintaining lending for the economy.”
