The Government’s announcement it will “top up” credit insurance in the Budget could be a good sign for the supply chain of embattled Jaguar Land Rover, economists at Ernst & Young have said.
But they added the Government needed to speed up its delivery of business support schemes before it was too late.
And there were rising worries in the business world that the Government was acting too slowly, and its credit insurance plans were too little, too late.
JLR and its massive supply chain – who are responsible for about 75,000 jobs – were hoping to see some support from the Budget on Wednesday.
The carmaker received a boost a few weeks ago when the European Investment Bank approved a £340?million loan to the cash-strapped firm to help it develop green technology.
But the firm has always maintained it needed some kind of cashflow support on top of this.
Ronnie Bowker, the senior partner of Ernst & Young in the Midlands, said there were some signs of hope for JLR, with the proposed scrappage scheme set to boost the market in general.
“The scrappage scheme’s probably the most relevant announcement to the West Midlands because we are focused on the automotive here,” he said. “If you look at what’s happened in Germany it has clearly stimulated the sector, and that’s got to be encouraged.
“Ultimately anything that helps the automotive sector in general then that helps them.
‘‘There’s these further comments about the investment in green technology. That will be helpful – but we’ll have to see how helpful.”
Mr Bowker said the £5?billion extra put into the credit insurance scheme would come as a relief to the smaller companies that made up a large proportion of the supply chain.
“The suppliers can be quite small businesses. If they are able to get credit insurance that will help,” he said. “For lots of small businesses, the credit guarantee is important, lots of companies are feeling the pinch because of that.
“But the challenge is getting those schemes up and running. There’s so much to do in terms of getting this to work.
‘‘It’s a case of speed. Some of those things sound good in theory, but it’s about getting them done in a way that helps the businesses further down the supply chain.”
Mr Bowker spoke to The Birmingham Post before the ITEM economic forecasting club – sponsored by E&Y – met in Birmingham.
Adrian Cooper, the chief economist of the ITEM club, said there were emerging signs of recovery in the financial services sector, with banks opening up lending, and businesses starting to become more optimistic. And he said the Budget had surprised analysts with how upbeat it had been about future growth rates, adding few predictions, including the ITEM club’s own, forecast a return to growth as early as 2010.