U.K. Drafts Plan to Save Strategically Important Firms: FT
U.K. Draws Up Plan to Save Strategically Important Companies: FT
(Bloomberg) -- Britain’s finance minister, Rishi Sunak, has authorized a plan to save strategically important companies in exceptional circumstances, the Financial Times reported, citing details shared with the newspaper by the Treasury.
Under the plan called Project Birch, the government would rescue any companies whose failure would “disproportionately harm the economy,” the Financial Times said. A Treasury official declined to comment on the report.
While it’s not clear which companies the government deems strategically important, some of the nation’s biggest employers are reeling, the travel industry has collapsed and auto sales have all but folded. Last month, the Bank of England warned that the outlook for jobs was “horrendous.”
Among the bigger announcements detailing the corporate carnage, Rolls-Royce Holdings Plc is cutting 9,000 jobs, utility Ovo is axing 2,600 positions and Virgin Atlantic Airways Ltd. is trying to avert collapse. Jaguar Land Rover, the country’s largest automaker with some 38,000 employees, is in talks to borrow more than 1 billion pounds ($1.2 billion) through the emergency coronavirus lending program, people familiar with the matter said.
While the aviation sector is being hit hard, Boris Johnson’s government has so far ruled out a broad bailout of the industry, asking firms to first tap all commercial avenues to raise funds to protect taxpayer interests, with the government assisting only as a last resort. Nor has International Consolidated Airlines Group SA -- parent of British Airways -- sought the state-backed loans on offer to a wide range of businesses.
Official figures released last week showed the government is paying the wages for about 10 million jobs as part of a package totaling almost 40 billion pounds. And according to a report published this month by McKinsey & Co., almost a quarter of U.K. jobs face elimination because of the coronavirus pandemic, with people on lower incomes the most at risk.
Sunak has increased the Treasury’s capacity to handle bailouts of “viable companies which have exhausted all options,” the report said. Any support would be on a “last resort basis,” the FT reported.
Sunak’s allies told the newspaper that the Treasury would not initially seek equity stakes in struggling companies, preferring to extend loans.
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