Business Secretary Lord Mandelson has outlined a package of support for the UK’s car industry which includes guaranteed loans of up to £2.3 billion for car manufacturers and suppliers.
Speaking to the House of Lords this afternoon he announced the two cornerstones to the package: £1.3 billion is from the European Investment Bank and grants of up to a £1bn to fund "worthwhile investments".
Applications from carmakers and suppliers for funds would be reviewed on a case by case basis and there was “no blank cheque on offer” and there would be no operational subsidies.
Mandelson maintained that the UK car industry was "not a lame duck" and "the package is not a bailout".
He wants the funds to be used to fuel research and development of cleaner, low carbon vehicles, including electric and hybrid technology.
Mandelson also said spending on the Train to Gain skills training for automotive employees would be boosted to £100m from its current £65m, if there was demand from the industry.
The new trade and investment minister Mervyn Davies will also draw up a plan to improve the car companies’ financing arms’ access to funding.
"Britain needs an economy with less financial engineering and more real engineering," Lord Mandelson said. "The car industry can and should be a vibrant part of that future."
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: “This is an important announcement that recognises the strategic contribution of the motor industry and follows action in other EU member states, the US and Japan.
“The UK motor industry is productive and globally competitive with a long-term future at the heart of the low carbon agenda. We look forward to discussing the substance of the announcement at our meeting with Lord Mandelson tomorrow.”
Sue Robinson, director of the Retail Motor Industry Federation, said: "Consumer confidence in car-buying could receive a boost as a result of the Government's public show of support for the motor industry.
"This investment in the industry should send the right message to consumers, endorsing the availability of credit and the excellent deals in the showroom."
Following his statement, Lord Mandelson made reference to a self financing scrappage scheme that would encourage motorists to dispose of older and more polluting vehicles, in favour of newer vehicles.
Robinson said: "The proposition that the UK should adopt a self-financing scrappage policy was first proposed by RMIF chairman Paul Williams on behalf of the RMIF at our meeting with Lord Mandelson in November 2008. The RMIF will shortly be presenting a paper to Government that puts the case for a self-financing scrappage scheme in the UK that mirrors those successfully adopted in other EU states. "
Unite, the UK’s largest union, welcomed the assistance but warned that more support will be needed for the car industry.
Tony Woodley, Unite joint general secretary, said: "It will come as a massive disappointment to the tens of thousands of workers employed in or dependent on this vital industry.
“Two billion pounds sounds like a lot of money, but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies."
Woodley said the aid was a fraction of the amount given by other goverments in Europe and Ministers needed to more than double the money available immediately.
Woodley added: "Make no mistake, we will be continuing to fight for more assistance from government for this industry. The spectre of redundancy is still hovering over thousands of skilled jobs. We desperately need to see creative action, such as reduced hours with pay losses made up by the state. Support for the credit arms of the car companies is also vital to keep product moving."
Derek Simpson, joint general secretary of Unite said the support for technological change was weclome, but the money from Europe would take months to reach manufacturers and suppliers in the UK.
Why is the automotive sector important to the UK economy?
• 27 car and CV manufacturers operating in the UK
• 1.75m cars and commercial vehicles produced each year
• £51bn turnover
• £9.5 billion value added
• Over 800,000 UK jobs
• UK automotive manufacturing supplies over 100 markets worldwide offering some resilience to the UK issues
• New cars emit less CO2 than older models – the average new car CO2 emissions have fallen 13% in the last decade