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Critics have warned that UK ministers risk creating a “moral hazard” after they granted a £1.5bn loan guarantee to carmaker JLR to support its supply chain following a devastating cyber attack.

Although the guarantee announced on Saturday has received cross-party support, both JLR and the government are likely to come under intense pressure to explain the agreement’s terms.

JLR has been unable to resume production since the August 31 attack, putting at risk the jobs of about 200,000 workers in the company’s supply chain.

On Sunday, Tom Clougherty, executive director of the free-market Institute of Economic Affairs think-tank, said a commercial loan underwritten by the government was preferable to other options that had been on the table. Those had included a novel proposal for the government to purchase components temporarily from JLR’s supply chain and sell them on later to the carmaker once production resumed.

However, Clougherty said the “biggest concern” is that the loan guarantee represented a further expansion of the government’s role in economic life.

“Will every cyber attack now result in calls for a taxpayer bailout?” he asked. “Will companies be less inclined to insure themselves against such risks?”

Jamie MacColl, senior research fellow and cyber security expert at the Royal United Services Institute, also warned that companies might now decide there was no need to take out cyber insurance or invest in security.

“That’s the real moral hazard issue with this,” he said.

Other experts questioned why JLR needed a UK government guarantee to secure a loan from a commercial bank and whether its Indian owner, Tata Motors, could have intervened.

JLR had not purchased cyber insurance, according to people with knowledge of the situation. It was still in discussions with insurance broker Lockton on whether to buy a policy when the attack was launched.

JLR declined to comment, while Tata Motors did not immediately respond to a request for comment.

Under the export development guarantee scheme UK Export Finance, a government agency, will cover up to 80 per cent of the risk on the commercial bank loan to JLR.

Any loan covered by the guarantee will come with a low interest rate and has to be paid back over five years. That should allow JLR to secure additional liquidity quickly to help its cash-strapped suppliers.

Liam Byrne, the Labour chair of the House of Commons business and trade select committee, said, like MPs from all the main parties, that it had been “the right thing for the government to do” to offer the guarantee.

“Otherwise the automotive industry would go out of business,” he said.

But Byrne, whose committee will demand details of the guarantee, also warned about the arrangement’s risks.

“Going forward, there is a real risk of moral hazard,” he said. “As a country we’re going to have to remake the way the state and market work together to try and safeguard British industry against these kinds of risks.”

JLR has yet to sign a loan agreement with a bank, according to a person close to the company.

UK-based companies normally need to earn at least 20 per cent of their turnover from exports to be eligible for the export credit development guarantee scheme.

However, companies less dependent on exports can also apply if they can show the guarantee would enable them to “significantly develop” exports. 

JLR previously received £500mn in export development guarantee against a £625mn loan from 12 commercial banks in 2022 to support its transition to electric vehicles. According to its latest accounts, the remaining balance on the facility was £219mn.

In July, US rival Ford received a £1bn export guarantee to help finance its electric shift.

Other recent recipients of EDG support include Chemring, which makes decoys and sensors for the defence industry, and Shotton Mill, a paper mill in north-east Wales. 

The government considered providing a guarantee to Belfast shipbuilder Harland & Wolff last year, but decided against doing so, given the high perceived risks.