Target credit crunch to save the economy

Jan 13 2009 by Sarah Green, The Journal

ON Friday key members of the North East business community, in particular those from the manufacturing sector, met with Nick Brown, the regional minister, to highlight how they would like government to respond to their position.

The need for action had been brought home 24 hours earlier when Nissan announced 1,200 job losses in Sunderland. The message was clear, good well run businesses are shedding jobs due to external economic conditions that they could not have foreseen or planned for 12 months ago.

If we look at the specific Nissan situation it was clear from the Nissan Regional Response Group meeting on Friday, led by One North East that the region was rallying to ensure that all employees of Nissan received the best package of support to enable them to find alternative employment. But it is a tough market. The CBI attended the Prime Minister’s Job Summit yesterday and whilst he announced a range of packages aiming to help individuals back in to work, particularly the long-term unemployed, no solutions were offered to fix the underlying issue – how to resume the flow of credit.

Credit is at the heart of the problem. Nissan has stated that they have both dealers and individuals who want to buy their cars but suddenly neither can secure the finance to do this. Other manufacturers report that trade credit insurance which is a condition of their credit financing has been pulled overnight and therefore their credit line has correspondingly disappeared. Government has taken some measures to try and restore the private sector credit flows but needs to do more. And where the private sector won’t tread, the government may have to intervene directly. For example, the government could provide bridging finance for the Nissan distribution network which would enable car dealerships to get the credit to buy cars again. And it needs to provide continued top-up provision for credit insurance.

So whilst we welcome measures to help the unemployed, we also need initiatives that will stop people being made unemployed in the first place.

The CBI believes that the best way to protect jobs and the economy is to target the credit crunch. If not good businesses will fail, causing more job losses and lasting damage to the economy.

Sarah Green, regional director, CBI North East