The UK Treasury is facing a mounting clamour for state help from business leaders, but officials have warned they should not expect sector-specific bailouts to protect them from the coronavirus crisis.
The latest appeal came from Britain’s steel industry which has warned the government that liquidity is drying up for businesses in a sector already struggling with a market downturn even before the virus struck.
Government has insisted that industries should use the huge interventions already announced by the Treasury for business loans and to subsidise workers’ pay and allow tax delays.
Rishi Sunak, the chancellor of the exchequer, has so far committed £60bn of support to keep the economy afloat through its biggest challenge in generations.
The government has stepped in to rescue railway operating companies and is poised to unveil financial support for bus companies to keep crucial transport links going.
It has not ruled out a bailout for struggling airlines, saying it will negotiate with individual aviation companies in a way that secures the best deal for taxpayers. But officials say they do not want that to become a template for umpteen other industries.
In a letter to the aviation industry on March 24, Mr Sunak suggested there were limits to the extent that the government could or would bail out struggling businesses. “We would expect all companies to be pursuing all possible actions to preserve cash and maximise liquidity, including engaging with shareholders, lenders and the markets and utilising all available assets and facilities,” he warned.
“Once you open the door to one sector, the sector next door starts asking for help too,” said one senior government official on Tuesday. “We have already put in place an unprecedented series of measures.”
During a phone call with business department officials last week, steel industry executives made clear that they were unable to access the emergency financing on offer because many companies fell outside the scope of the two main loan schemes for large and smaller companies, according to two people familiar with the matter.
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As demand for the metal has slumped because of the economic shutdown and customers delay payment, the lobby group UK Steel said that the nation’s steel companies were “fast approaching a cash flow crisis”.
“It is critical that the government casts its net more widely, follows the example set by governments elsewhere, and ensures all companies that need liquidity support can access it,” the organisation added.
The gardening industry warned on Tuesday that many of its suppliers faced ruin because huge numbers of plants would have to be thrown away as retailers have shut. The Horticultural Trades Association warned the government that the sector was facing losses of £687m by the end of June.
“Stock is one of the biggest components of asset value in the sector — stock write offs will destroy the balance sheets of many and make it impossible for them to continue,” said HTA chairman James Barnes.
Energy companies have already asked the government to back a loan scheme worth up to £100m a month so they can offer payment holidays to companies and households struggling to pay their energy bills.
Meanwhile on Tuesday the airport ground handling industry warned of the “imminent collapse” of their sector. Business leaders from the four main cargo and ground handling companies — Swissport, dnata, WFS and Menzies — told the government they needed immediate help to prevent severe damage to the UK’s supply chain.