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The UK government has signed off a loan guarantee worth up to £1.5bn to enable Jaguar Land Rover to borrow more money following one of the most damaging cyber attacks against British industry.
Peter Kyle, the business secretary, announced that the export development guarantee would come from UK Export Finance, a government agency, which would make it easier and faster for JLR to receive a loan from commercial banks.
Export development guarantees provide partial guarantees to commercial lenders, typically covering up to 80 per cent of the risk on loans to companies that export from the UK.
The government said any loan covered by the guarantee would be paid back over five years and would bolster the carmaker’s cash reserves so it could support its more than 1,000 suppliers that have been hit by a month-long shutdown in UK production.
The loan agreement between JLR and commercial banks has not been signed yet and JLR could have also raised additional money by turning to financial markets. But a person close to the company said receiving the loan guarantee was the “fastest option” to ensure liquidity to support its suppliers.
JLR, which is owned by India’s Tata Motors, is one of the UK’s largest exporters and employs 34,000 directly in its UK operations at Solihull and Wolverhampton in the West Midlands, and Halewood in Merseyside.
It also operates the largest supply chain in the UK automotive sector, much of it made up of small and medium-sized enterprises, that employ around 120,000.
Kyle had previously said JLR, a “profitable company backed by a wealthy global company”, should mainly be financially responsible for its supply chain.
But on Saturday, he said the cyber attack on August 31 that forced it to freeze production was an assault on the wider UK automotive industry and thousands who work in it.
“Following our decisive action, this loan guarantee will help support the supply chain and protect skilled jobs in the West Midlands, Merseyside and throughout the UK,” he said.
“Jaguar Land Rover is an iconic British company which employs tens of thousands of people . . . today we are protecting thousands of those jobs with up to £1.5bn in additional private finance, helping them support their supply chain and protect a vital part of the British car industry.”
The decision also came after Kyle spoke to senior figures from Tata and JLR this week, according to government officials.
JLR received £500mn in export development guarantee in 2022 to support its transition to electric vehicles. In July, US rival Ford received a £1bn export guarantee to help finance its electric shift.
On Thursday JLR said it had restarted some of its computer systems in an attempt to accelerate payments to its cash-strapped suppliers. But the IT restart has not yet led to a resumption of vehicle production in the UK, which has been shut down since September 1.
Ministers had been considering various options to support the carmaker, including a novel proposal to temporarily purchase components from the supply chain and then sell the components on to JLR once it resumed normal production.
Some experts had criticised the proposal as creating a “moral hazard” since JLR had not taken measures of its own, such as purchasing cyber insurance.
If JLR could not produce vehicles until November, David Bailey, professor at the University of Birmingham, had estimated that the group would suffer a revenue hit of more than £3.5bn, or about £1.3bn in gross profits.
Andrew Griffith, the shadow business and trade secretary, welcomed the support but criticised the government for being too slow to act.
“Ministers have got to the right place but took too long to get there. Labour must now also pick up our suggestion of a Cyber reinsurance scheme to protect British businesses from state backed actors in an increasingly dangerous world.”
