Carmakers demanding government loans to save thousands of jobs have been told to find the money themselves, as ministers warned big household names could go to the wall.
Trade minister Ian Pearson scotched rumours an aid package to help businesses including Jaguar Land Rover was imminent.
He held out the prospect of government aid, but warned: “Loans from government need to be seen very much as a last resort. In the first instance we should be looking to companies and parents to provide funds for the future.”
Jaguar Land Rover’s parent, Indian giant Tata Motors, is reported to be selling part of its vehicle loans portfolio to raise cash to keep factories running.
Mr Pearson (Lab Dudley South), who is an economic secretary to the Treasury as well as a minister in the Department for Business and Enterprise, was speaking after MPs urged the government to save the automotive industry from “fatal damage” caused by the banking crisis.
West Midlands MPs piled on pressure in a Commons debate, as they warned ministers to act before Christmas to save thousands of jobs.
But there is still no agreement in the top ranks of government over whether to provide loans to carmakers.
Business secretary Peter Mandelson is understood to back the proposal but Alistair Darling, the Chancellor, is yet to be convinced.
The Society of Motor Manufacturers and Traders (SMMT) has held meetings with ministers and officials asking for loans from the Treasury or government guarantees on loans provided by banks, which would give banks the confidence to lend.
It insists the money would not be used to bail out unprofitable companies, and would replace credit usually provided by banks. Mr Pearson told MPs: “We’ve seen the collapse of big household names like Woolworths and MFI, and clearly we cannot rule out other companies being at risk. It is one of the reasons why we need to continue to have dialogue.
“But I want to stress any government support needs to be regarded as exceptional. These are exceptional times and we are having to contemplate exceptional things.” As well as finding money themselves, businesses should consider “restructuring,” he said.
“We should look to companies to restructure. But there is a case in certain instances where we possibly need to go further, that’s why we continue to have dialogue with companies.”
He was responding to a string of MPs who warned businesses such as Jaguar Land Rover, which employs more than 16,000 people in Birmingham, Solihull and Merseyside, faced a desperate situation.
Jim Cunningham (Lab Coventry South) said: “It’s an urgent situation. If we don’t do anything we could lose anything up to 100,000 jobs, maybe 200,000.” Richard Burden (Lab Northfield) said the industry had a regional turnover of £13billion.