The automotive industry is rapidly approaching crunch time, as the need for Government support for Jaguar Land Rover becomes increasingly acute.
As we have said many times, there has been no demand for cash to bail out the company. Instead, what is required is credit, which would be lent on the usual commercial terms.
This is what banks do all the time in normal circumstances, and Jaguar Land Rover’s current problems are a result of the failure of the banking sector, not any problems in its business model.
Business Secretary Peter Mandelson is set to announce proposals for credit guarantees for small and medium-sized businesses, making it possible for banks to start lending again.
This is something industry has been demanding for some months. It also means there is a level of consensus between the major political parties, with both Labour and the Conservatives now supporting Government-backed credit for business.
Full details are emerging over time, but these measures have the potential to be of real help to the economy – more so than the cut in VAT, which has little real impact on spending or household finances.
It remains to be seen whether or not help for larger companies such as Jaguar Land Rover will also be forthcoming.
The Government is right to be considering the needs of the economy as a whole, and not just one sector.
But Jaguar Land Rover is important for a number of reasons, including the number of people it employs either directly or indirectly – 16,000 at its factories and many thousands more in the supply chain – as well as the skills base which would be lost if it was forced significantly to cut back.
It also needs a decision on credit, and soon.
