Rishi Sunak is developing a business bailout package which would see the Government act as lender of ‘last resort’ to key UK firms to stop them from going under because of the coronavirus crisis, it was claimed today.
The Chancellor is said to be working on an initiative known within Whitehall as Project Birch which is designed to protect companies deemed to be crucial to Britain’s economy.
It is thought tailored support could be made available to sectors like aviation, aerospace and steel production but the Government is under pressure to go even further and to consider the state taking a stake in certain businesses.
Support could be offered to ‘viable companies which have exhausted all options’ and to those whose collapse would ‘disproportionately harm the economy’.
Rishi Sunak, pictured in Downing Street on May 21, is believed to be developing ‘Project Birch’ which would save key UK businesses from collapse
The support is likely to take the form of Government loans but ministers are not thought to have ruled out part-nationalisation as an option.
Some experts believe the latter approach would be preferable for some firms to stop them from drowning in debt.
Firms which have reportedly already held talks with ministers include Virgin Atlantic and Jaguar Land Rover.
The Treasury told the Financial Times: ‘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 Government has already made billons of pounds of support available to businesses during the outbreak so far.
Some believe the total value of that support could end up being above £100 billion.
But there are fears that even that may not be enough with plans being put in place to ensure critical pillars of the UK economy do not collapse.
Additional lending is believed to be Mr Sunak’s preferred approach rather than the ideologically more difficult equity stake route.
The Tories are largely opposed to nationalisation as a concept and any move by the Chancellor to link the state to private businesses in such a manner would be likely to spark an inevitable backlash from Conservative MPs.
But Alistair Darling, who served as chancellor in the aftermath of the 2008 financial crash, said taking a stake in companies ‘might be a good thing for the taxpayer to do’ because there could be a benefit when the stake is sold off at a later date.
A final decision on medium to long-term financial support for UK business is not expected to be taken until the Autumn.