Coronavirus: ‘Strategically important’ companies could receive government bailouts

Strategically important companies will be able to receive government bailouts on a “last resort” basis, it has been revealed.

The Treasury has said it will step in when a company’s failure would “disproportionately harm the economy” – but only once all other options had been exhausted.

A spokeswoman said: “We are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer.”


Under the new plan – named Project Birch – Chancellor Rishi Sunak has increased the Treasury’s capacity to handle bespoke bailouts of viable companies.

It means the government is prepared to be a lender of last resort across all sectors of the economy, and not just in the aviation sector as Mr Sunak previously suggested in a private letter.

Although the Treasury could end up buying stakes in crucial businesses facing acute financial problems exacerbated by the coronavirus pandemic, it is believed that the government’s preferred option involves extending loans.

Companies in the steel, aviation and aerospace industries are among those in dire straits, with the FT reporting that the likes of Virgin Atlantic and Tata Steel are already in talks with the government – or exploring what their options are.

Alistair Darling, who served as chancellor during the 2008 financial crisis, told the newspaper: “Taking equity might be a good thing for the taxpayer to do.

“If you’re lending money, say to an airline, it’s only right the taxpayer gets its fair share of success at the end.”

:: Listen to Sophy Ridge on Sunday on Apple podcasts, Google podcasts, Spotify, Spreaker

Last week, the chancellor warned of a “severe recession the likes of which we haven’t seen” after official figures showed a record rise in unemployment claims.

He told a parliamentary committee that there was “more hardship to come” after the data showed 856,500 people submitted jobless benefit applications in April.

Mr Sunak indicated that despite the government’s “unprecedented” effort to prevent mass unemployment, it “won’t be able to protect every job and every business”.

Ryanair chief Michael O'Leary laid into Virgin Atlantic boss Sir Richard Branson over his plans to take state aid for his business

24 April: ‘Branson can bail himself out’

The Treasury is already bankrolling 80% of wages for eight million temporarily laid-off workers under its Job Retention Scheme.

This has cost £11bn so far, and the latest official estimates suggest this could rise to £50bn.

The scheme is designed to dissuade business crippled by the lockdown from permanently dismissing employees, with their salaries subsidised by the taxpayer until they can return to work.

Read More

Related Posts

Leave a comment