JLR cash not reaching SME suppliers fast enough, warns manufacturing expert

Cash from the £1.5 billion commercial loan guaranteed by the government to support JLR’s supply chain is not tumbling down the supplier tiers quick enough, a webinar held by national audit, tax, advisory and consulting firm Crowe was told.

Johnathan Dudley (pictured), head of manufacturing and SME corporate at Crowe, said the message was clear that speed is of the essence if small suppliers further down the supply chain are to survive.

One participant said the impact on UK automotive was worse than COVID-19, saying: “Nobody outside of the automotive industry understands how bad this is.”

Dudley said: “It is absolutely vital that that the money starts to filter down the chain – and quickly.

“Speed is of the essence. The depth of penetration of the loan funding is an issue.

“Will it trickle down the supply chain and across the ancillary affected businesses fast enough, wide enough and far enough before businesses run out of money?

“Naturally, JLR and Tier 1 suppliers will only start ordering new materials once they have used up stocks that they already hold or have created during plant shutdowns.”

“This will stretch credit even further down the supply chain.

 “We don’t know when the money will hit suppliers’ bank accounts, but in the meantime, they have to pay rent or mortgages, wages and their own suppliers.”

Another participant stressed that after the COVID-19 pandemic, company directors were less inclined to put their own personal guarantee in place if they need to access loans or increased overdraft facilities.

Dudley said there was an immediate need for stress emergency funding and support to help businesses in addition to funding feeding down from JLR.

“More needs to be done to help businesses that are running out of time, or who are not in the direct supply chain.

“Above all, we need to know that this money is going to funnel down the tiers. Not just pay Tier 1 suppliers and get stuck there.”