The government has been accused of failing to rescue struggling industrial companies through its “Project Birch” bailout scheme amid signs that manufacturers are slashing investment in a fight for survival.
Against a backdrop of mounting job losses, Labour said the Treasury support scheme was gathering dust after only one company qualified for emergency bailout funding.
Industry sources said about 10 companies wanted to use the scheme, which involves the government taking equity stakes in firms in exchange for emergency finance, but had found the process difficult and that talks had fizzled out.
Celsa Steel, a Cardiff-based steel company, became the first to secure support through Project Birch in July. However, talks that may have led to taxpayers owning stakes in Jaguar Land Rover and Tata Steel ended a month later, the Financial Times reported.
JLR had raised £560m from five Chinese banks in June, in a signal to the Treasury that it had opportunities for securing funds. The carmarker had been excluded from a Bank of England support scheme because its debt was not rated as investment-grade before the crisis began, meaning it was seen as too risky.
Rishi Sunak, the chancellor, has previously warned that government bailouts would be “exceptionally rare” and would only be used as a last resort when firms exhausted all other avenues for finding financial support.
One industry source said short-term funding could be secured by some firms, but that lacked the scale and the longevity of support the government could provide. “It’s like going to one credit card company to pay off another, and then you need to find a third in a year’s time,” they said.
Anneliese Dodds, the shadow chancellor, said Birch had been floated as the saviour of British industry but months had passed with just one business receiving any support.
“It’s a matter of public record that companies are actively seeking help. The longer it takes to get it, the higher the risk to jobs and businesses that the government itself admits are too important to fail,” she said.
The Labour intervention comes as Make UK, the manufacturing industry lobby group, said industrial firms across Britain are being forced to slash investment in a battle to stay afloat.
According to the Make UK/BDO manufacturing outlook survey for the third quarter, the balance on investment intentions fell to -32% from -26% in the three months to June, meaning many firms plan to cut investment rather than increase it.
Tom Lawton, head of manufacturing at BDO, an accountancy firm, said companies cutting back on investments would have serious long-term implications for the economy. “The government must be alive to this risk and provide the support required to help UK manufacturers,” he said.
As a result, Make UK said it expected manufacturing output to fall by almost 11% this year, and downgraded its forecast for recovery in 2021 from 6.2% to 5.1%.
The organisation has previously warned that more than two-fifths of manufacturing firms in a survey had made redundancies since the coronavirus pandemic struck, while almost a further third said they intend to cut jobs in the next six months.
Ed Miliband, the shadow business secretary, said free-market ideology had got in the way of the government’s willingness to support businesses.
Calling on it to provide more details about the progress of Project Birch, he said: “For months, manufacturers have been crying out for help, warning of job losses if they didn’t get it. While government has sat on its hands, thousands of people have lost their jobs in manufacturing.”
The Treasury said it had provided unprecedented support for businesses to get through the pandemic. “As a last resort, we will consider the situations of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors.”