Business secretary Peter Mandelson is to meet Jaguar Land Rover managers this month to continue talks about a potential government loans package to aid the struggling carmaker.
He told MPs that the carmaker, which has plants in Birmingham and Solihull, would not be allowed to fail because its investment in “green” technology was vital to Britain’s future. But Lord Mandelson said the government had not yet decided how to make aid available.
He was giving evidence to the House of Commons Business Committee as the carmaker axed 450 jobs following the “severe reduction” in demand for new cars. The government announced it is to guarantee bank loans to small and medium-sized businesses with turnovers up to £500million a year.
But this will not include Britain’s largest businesses such as JLR, which has also asked the Treasury for loans or guarantee government loans, giving it access to credit.Lord Mandelson said: “I want to see the automotive sector remain an important part of Britain’s manufacturing base.”
But he said he accepted carmakers faced “serious problems”.
He added: “I’m in discussions with the industry’s representatives. I saw them before Christmas and I’m going to see them again at the end of this month, to see what appropriate help and interventions we can provide.”
Lord Mandelson highlighted Jaguuar Land Rover’s investment in new technology, and suggested this could justify government aid, saying: “We are talking about £480million spent on research and development by the company, investing heavily in low-carbon technology. This is very important not just for the automotive industry but for manufacturing in this country. I would say it wouldn’t be right for anyone to stand by and see this sort of investment go to the wind just because of the current financial circumstances we are facing.”
When deciding if the government should intervene to support businesses, he would consider the effect closure would have on regional economies. Low-carbon and environmentally-friendly technology would play a huge role in Britain’s economic succcess, he said.
Peter Luff, the Committee Chair and Conservative MP for Mid-Worcestershire, asked when a decision would be made about support for the business. But Lord Mandelson said a range of proposals had been put forward by carmakers, including support for finance arms which provide credit to customers, and ministers had to make careful decisions about how to spend public funds. “We have to decide what to target and prioritise, and we are not yet at the end of that process.”
He asked Mr Luff: “If it was a choice between prioritising the finance arms and supporting research and development, where would you put the money?”