Nearly 500 more jobs were lost in the UK’s battered car industry yesterday, but not a single company has yet managed to access funding through the Government’s £2.3bn rescue package announced three weeks ago.
GKN, the components maker, is to axe a further 564 positions in the UK. Some 473 of them are in its automotive business, reducing it by nearly a third, and two plants – one in Hamstead, one in Walsall – are to close. The company, which has already cut 2,800 jobs worldwide, blamed a “dramatic and sustained reduction in customer orders”.
Coming a day after BMW laid off 850 workers at its Mini factory, the GKN announcement adds to the sense of an industry in a tailspin. Two businesses in the sector are going under every week in the West Midlands alone, putting about 1,000 people out of work, according to the Birmingham Chamber of Commerce.
But despite the high-profile launch of a loan-guarantee scheme by Lord Mandelson, the Business Secretary, at the end of January, funding will not be available for weeks. “The whole process is a waste of time,” a senior executive at one component supplier said. “The Government is long on spin, but short on delivery – I don’t know anybody who has got anything, anywhere.”
The Department for Business says no cash has been forthcoming because the proposals are yet to be cleared by the European Commission.
But companies are still required by putative lenders to spend tens of thousands of pounds on fees for third-party verification of their applications. One West Midlands firm has been charged £67,000 so far by the accountants insisted upon by the high-street bank approached for a loan after the launch |of the Mandelson scheme. Lenders are also asking for personal liability from directors to underwrite the 25 per cent not guaranteed by the Government under the proposed plan.
“Why announce something that is not there, and encourage people to spend both time and money trying to access a fund that does not exist?” Rachel Eade, at the Birmingham Chamber of Commerce, said. “It is just using smoke and mirrors to give false hope.”
Although the scheme was announced in January, the application to the European Commission was not submitted until Monday. A decision is still not expected for some weeks.
Lord Mandelson, addressing the Council for Foreign Relations in New York yesterday, pleaded for time for governments to address an economic situation for which there are “no precedents”. “While governments need to take time to plan carefully, they are accused of dragging their feet,” he said. “While, inevitably, measures cannot take effect immediately, there is a demand for instant delivery.”
But the car industry may not have time to wait. Calls began in November for rapid assistance to offset falling consumer spending and restricted finance. Even when January’s loan guarantees are working, they will only apply to “green” development plans, not to working capital requirements.
The industry needs measures to avoid short-term redundancies, and the concomitant loss of skills, say firms throughout the supply chain. Neil Barlow, at the Northwest Automotive Alliance, said: “People are questioning whether we will have an automotive industry in the future if we don’t do something now.”