British manufacturers have warned that the government will need to increase support for sectors from steel and aerospace to carmaking and heavy industry to prevent extensive job losses and risk their competitiveness.
At a House of Commons business select committee hearing on Thursday, MPs were told that the government’s coronavirus bailout loan schemes were still not helping larger, strategically important companies, while policies around social distancing and quarantine would damage the recovery prospects of myriad companies.
Business groups representing manufacturers, carmakers, steel and aerospace warned about the future of their sectors, and raised the prospect of deep job losses in the next few months as companies continued to struggle with the economic fallout of coronavirus.
Paul Everitt, chief executive of aerospace industry group ADS, said: “This is probably the most challenging period I’ve ever seen in our industry. We are going to see tens of thousands of people across the UK aerospace industry losing their jobs in the coming weeks and months because there is no demand.”
He added that “the slow expected start to flying is only going to increase the depression in the weeks and months ahead”.
Stephen Phipson, head of manufacturing trade group Make UK, said that about a quarter of manufacturers had said they would make job cuts. He said that government-backed loans schemes were failing larger companies, which have struggled to meet strict conditions around debt structures. He pointed to carmaker McLaren as a company that had failed to access an emergency loan in recent weeks.
Gareth Stace, director-general of UK Steel, a trade body, said that it had been “over 10 weeks since some steel companies have applied directly to the government for a loan . . . and we still have not yet seen any delivery”.
He added that the sector was finding it hard to “hang on” given the lack of liquidity. “If I compare steel companies in France or Germany, within 10 days of starting an application . . . the money was in the bank.”
The groups called for greater government support through debt and equity funding for struggling companies that have fallen between the cracks.
Various models have been proposed in recent weeks — including by ADS — to set up investment funds backed by public and private cash to either provide equity or take on bad loans. The government is also considering how to help bail out specific companies through “Project Birch”.
Carmakers were also struggling with requirements on how to safely reopen their factories, according to Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders.
He said that capacity and profitability would be hit by the need to keep workers two metres apart. He estimated that 200,000 units would be lost this year as a result, while the social distancing would make every car made in the UK “much more expensive” to produce. Mr Hawes predicted a 30 per cent drop in new car sales this year.
One carmaker, he said, could only reopen at 50 per cent capacity given the social distancing rule — which was “not viable long term”. Changing this requirement to one metre, he said would enable the factory to work at full capacity.
The manufacturers also raised renewed concerns over Brexit and the progress of trade talks. Mr Stace said that it was crucial to revoke import tariffs on steel imposed by the US — the second biggest market for the UK — while Mr Hawes said that the threat of tariffs “removes any chance of competitiveness hence the importance of getting a deal”.