Jaguar Land Rover is finalising a deal to lend its suppliers hundreds of millions of pounds after a taxpayer-backed “rescue” of Britain’s biggest carmaker hit the skids.
Bosses are this weekend putting the final touches to a radical lifeline that would see up to £500 million injected into its bombed-out supply chain, The Sunday Times can reveal.
The privately funded initiative is separate to a £1.5 billion “rescue” unveiled by ministers last Saturday. The taxpayer-backed deal is still yet to be signed off despite appearances to the contrary, multiple sources said. JLR declined to comment.
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JLR, which employs 34,000 people and supports a further 120,000 in the UK supply chain, was plunged into a crisis after hackers breached the company’s IT systems at the start of September. Global production has been at a standstill since, although a phased restart is scheduled to begin on Monday. There is a broad consensus that JLR is unlikely to be back fully up and running before Christmas.
Business secretary Peter Kyle and Rachel Reeves, the chancellor, announced a £1.5 billion state-backed guarantee to JLR last Saturday, so that it could quickly unlock financing from commercial banks.
Ministers claimed that this money would be used as a lifeline to JLR’s supply chain. Reeves hailed the initiative as evidence of the government “protecting thousands of jobs”.
Yet the government-backed deal has not been signed. As and when it is, questions remain whether it provides a framework for the money to channel to the suppliers that are in desperate need of support.
“Many firms are telling us they are running out of cash and have no guarantee of future sales,” the heads of the Greater Birmingham, Coventry & Warwickshire and Black Country Chambers of Commerce told industry minister Chris McDonald in a letter sent this weekend.
“Whilst we will continue to raise awareness of HMRC’s time to pay scheme, if the situation worsens and the loan guarantee doesn’t flow to suppliers, further measures may be necessary,” a draft of the letter reads. “We encourage the government to review the lessons learned from the Carillion crisis in 2018 and MG Rover crisis in 2005 — namely the impact on their supply chains in the West Midlands and beyond.”
Chamber of commerce chiefs have written to Chris McDonald, right, the industry minister
JACOB KING/PA
JLR’s £500 million lifeline will operate as an invoice financing facility, sources said.
As work slowly restarts, suppliers will be able to apply to JLR to have invoices paid as soon as they are submitted to the carmaker, rather than waiting for remittance after a standard number of days. The scheme will only apply to “tier one suppliers” — those that transact directly with JLR.
It will rely on the tier one suppliers passing on the benefit to their suppliers — tier two — and so on throughout the supply chain.
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Sources cautioned that the JLR initiative was yet to be signed and could yet fall through. But it is hoped that it will lead to a “game-changer moment” for suppliers in the coming days. It is unclear whether the scheme would be only available to UK suppliers or also open to those overseas. JLR sources roughly half of its parts from abroad.
Separate to the government-backed scheme and JLR’s lifeline to suppliers, the carmaker signed a £2 billion funding facility from Standard Chartered Bank, Citigroup and Mitsubishi UFJ Financial Group earlier this week to bolster its cash reserves.