Coronavirus: UK government draws up plan to rescue key firms

A man wearing a mask crosses Westminster Bridge past the Houses of Parliament Image copyright Getty Images

The UK government has indicated it is prepared to rescue large British companies severely impacted by the coronavirus crisis.

The bailout plan, named “Project Birch”, was mentioned by Transport Secretary Grant Shapps in Parliament last week when discussing the future of the aviation industry.

The state could also take stakes in companies, reports the Financial Times.

HM Treasury said bailouts would only be considered as a “last resort”.

In a statement, a Treasury spokeswoman said: “We have put in place unprecedented levels of support to help businesses get through this crisis. Beyond that many firms are getting support from established market mechanisms, such as existing shareholders, bank lending and commercial finance.

“In exceptional circumstances, where a viable company has exhausted all options and its failure would disproportionately harm the economy, we may consider support on a ‘last resort’ basis.

“As the British public would expect, we are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer.”

The BBC understands the Treasury would have to notify Parliament of any spend incurred, and that although companies might seek financial assistance, this does not mean such support will be given.

Companies in trouble

On Saturday, Sky News reported that Tata Steel, Britain’s biggest steel producer, had approached both the Welsh and UK governments for financial aid that could run into hundreds of millions.

Image copyright AFP
Image caption Tata Steel says there has been a sudden drop in European steel demand, and is urgently seeking government assistance

Earlier this week, Welsh MP Stephen Kinnock told parliament that Tata Steel, which owns the steelworks in Port Talbot, needs around £500m in order to survive the pandemic.

And according to the Financial Times, aviation industry bosses have been asking the government for a “long-term investment facility” that would help to support supply chains.

Jim O’Neill, former Treasury minister and ex-chief economist at Goldman Sachs, told the newspaper he has been in discussion with government officials about creating a public sector-owned funding body to take stakes in firms that would be “inherently stable” in times of normal economic activity.

So far, to mitigate the financial impacts of the coronavirus lockdown, the government has announced an array of measures – deferring tax payments such as VAT and business rates, and paying over eight million workers’ wages through the furlough scheme, which has been extended until 31 July.

It has also paid out £22bn in government-loans, as well as £20.4bn in corporate financing through the Bank of England.

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