Manufacturing and aviation bosses were quick to complain that Santa Claus Sunak didn’t offer them a bailout yesterday.
You can see why; spooked by the prospect of millions of young builders, waiters and hotel staff standing idle on street corners, the Chancellor threw them a lifeline instead. Arguably, more support for engineers would have led to better quality job prospects.
That said, it would be wrong to forget the many other schemes our weightier industrials can access. Notably, the new export credit guarantee scheme which, as Rolls-Royce’s deal proves today, is a gamechanger for big exporters seeking long-term finance.
The Covid Export Working Capital Scheme (EWCS) sees the Government guarantee up to 80% of the risks to banks of providing critical cashflow facilities —overdrafts, in everyday parlance.
So, JPMorgan could arrange Rolls a stonking £2 billion loan facility to run for a whole five years. For a company so exposed to crippled aviation (just look at today’s ugly cash outflows), such a long term would be impossible without the EWCS. Banks, already constrained on their balance sheets, could not take the risk.
Not only that, but Rolls gets the facility at a standard market rate because the banks know the Government is good for the money.
It may still need a rights issue but it won’t now have to be an emergency one, even if the other Covid state loan schemes it’s using aren’t extended next year.
Sunak did not offer targeted help to every sector, but his measures should be taken in the round. This is a very generous Chancellor.
@ArmitageJim
