‘Project Birch’: behind the government plan to take stakes in key British industries
Government lining up ambitious European-style investment plan to bailout businesses and project jobs
The government is drafting wide-ranging plans to rescue large British firms at risk of collapse due to the coronavirus outbreak.
The Treasury has said support could be made as a “last resort” if a business’s failure could “disproportionately harm the UK economy”.
There are concerns that some large firms could be at risk of folding despite various measures put in place to support business, such as the furloughed worker scheme and deferring of tax payments.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
What is Project Birch?
Project Birch is the name given to the bailout plan under which government funding would be used to protect big companies from the financial impact of the pandemic.
It could involve the UK government buying a stake in companies, says the BBC, though the Treasury would initially seek to offer support in the form of loans.
Under Project Birch, Chancellor Rishi Sunak has given approval for the Treasury to handle tailored bailouts of “viable companies which have exhausted all options”, including other government loan schemes.
Aviation, aerospace and steel firms are among those in dire straits, and Jaguar Land Rover has also asked the government for significant financial help, says the Financial Times. Virgin Atlantic and Loganair are also in talks with the government, while Tata Steel is seeking information about what support might be available, adds the paper.
Energy suppliers are among those calling for a state bailout, as businesses have needed less power and unemployed workers are more likely to be unable to pay their bills, reports The Telegraph.
“In exceptional circumstances, where a viable company has exhausted all options and its failure would disproportionately harm the economy, we may consider support on a ‘last resort’ basis,” the Treasury said. “As the British public would expect, we are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer.”
–––––––––––––––––––––––––––––––For a round-up of the most important stories from around the world - and a concise, refreshing and balanced take on the week’s news agenda - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––
What has the reaction been?
Unions have welcomed the news, but urged the government that it must act quickly to save jobs.
“There is no more time to lose if we are to prevent a tsunami of job losses from sweeping through communities this summer,” said Unite assistant general secretary for manufacturing, Steve Turner. “We still need to ensure that proposed changes to the job retention scheme do not undermine a plan to recover and rebuild and that workers continue to get their wages.”
Business leaders have signalled support for the plan, says The Guardian, but only “if they were confined to being a ‘last resort’ for companies for whom borrowing more was not an option”.
Labour’s shadow chancellor, Anneliese Dodds, said support “must be focused on retaining and increasing employment. It must also build value for our country – with companies receiving support prevented from engaging in share buybacks and dividend payments”.
Tej Parikh, chief economist at the Institute of Directors, which represents company bosses, told The Guardian: “If key firms do fail it could have a knock-on impact on businesses throughout the supply chain, so its important for the government to consider plans to support them, based on economic impact.”
Any plan would inevitably prove complex, he added. “Deciding who receives investment won’t be straightforward, while many firms will be less than keen to cede decision-making to a state body.”
The Daily Mail’s business editor Ruth Sunderland said Sunak “probably has no choice but to help them out” and he will “need commercial astuteness as well as compassion to make this call”.
Not all companies will be guaranteed support, however. “There is a difference between being approached for support and agreeing to it,” a source close to the Treasury told MarketWatch.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
What is the next Tory leader up against?
Today's Big Question Kemi Badenoch or Robert Jenrick will have to unify warring factions and win back disillusioned voters – without alienating the centre ground
By Harriet Marsden, The Week UK Published
-
What is Lammy hoping to achieve in China?
Today's Big Question Foreign secretary heads to Beijing as Labour seeks cooperation on global challenges and courts opportunities for trade and investment
By Harriet Marsden, The Week UK Published
-
Bob Woodward's War: the explosive Trump revelations
In the spotlight Nobody can beat Watergate veteran at 'getting the story of the White House from the inside'
By Chas Newkey-Burden, The Week UK Published
-
Trump kept up with Putin, sent Covid tests, book says
Speed Read The revelation comes courtesy of a new book by Bob Woodward
By Peter Weber, The Week US Published
-
'The federal government's response to the latest surge has been tepid at best'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
Is Britain about to 'boil over'?
Today's Big Question A message shared across far-right groups listed more than 30 potential targets for violence in the UK today
By Sorcha Bradley, The Week UK Published
-
UK's Starmer slams 'far-right thuggery' at riots
Speed Read The anti-immigrant violence was spurred by false rumors that the suspect in the Southport knife attack was an immigrant
By Peter Weber, The Week US Published
-
Biden tests positive for Covid in fresh blow to campaign
Speed Read The president said he would consider dropping out of the race if presented with a "medical condition"
By Rafi Schwartz, The Week US Published