A CONSENSUS emerged across the car industry last night that the financial support announced by Lord Mandelson yesterday afternoon was not enough to save the day.
The car industry’s problems are short-term, yet Lord Mandelson’s measures address longer-term issues.
As car sales and factory output take a sharp nosedive, car firms face an immediate need for cash to boost their working capital so they can pay their wage bill in the months ahead. Lord Mandelson’s offers of support were tied into funding research and development of the next generation of green cars.
Perhaps the former EU commissioner is a visionary who sees that a jolt like the current recession can be turned to an advantage by forcing the country’s carmakers to adapt quickly to the new eco-friendly era. If his measures work, Britain may be able to take a leading role in the design and manufacture of the cars of the future.
On the other hand, it may be that Lord Mandelson has missed the point. If January, February or March’s wage bills aren’t paid, there will be no British car factories left at which to build the new eco-cars.
The Labour government is determined not to bankroll industry in the same way it bailed out the banks. Labour is hoping that, by offering bank guarantees instead of loans of its own, it won’t have to put the aid on its already stretched balance sheet. The government undoubtedly thinks that should it support car firms it will have to do the same for many other manufacturers such as steelmaker Corus, planemaker Airbus or tractor maker JCB. The Government supported the banks because it feared a bank collapse would take the entire economy down, too, which may be true. And yet, when the recession ends in 18 to 24 months’ time, we don’t want our country to emerge with a strong banking sector but no car firms. A successful, balanced British economy needs its car factory jobs.
The principle of using bank guarantees to support the industry is probably workable, but the value of those guarantees needs to be at least double the sums pledged yesterday and the loans need to be available sooner rather than later.
HOWLS of protest greeted the Centre for Cities publication of its review of the prospects for British urban areas during the recession.
The centre suggested that Liverpool would be one of the worst hit cities, along with Belfast and Hull.
In some senses, the findings are surprising, with the narrative sounding a bit behind the times, referring to local economic weaknesses that were certainly true in former decades, but may no longer be so.
The one British city that has already been badly hit by the recession and credit crunch is London. That’s because so much of the damage being done at the moment affects the financial services sector. Stockbrokers, corporate lawyers, accountants and bankers are suffering ahead of the rest of the country.
For the same reason, regional financial centres like Edinburgh, Manchester and Leeds could also expect to see a greater decline in economic activity than Liverpool, Hull or Belfast.
The bad news mounts with every day that passes. This is going to be a tough recession to get through, and the downturn is going to make its presence felt in all nooks and crannies of British life, whether in the North or the South, the public or the private sector. No place should expect to escape unscathed.
