Cash from the £1.5 Billion government-backed commercial loan to support Jaguar Land Rover’s supply chain is not reaching smaller suppliers quickly enough, raising fears that many SMEs could collapse before funds filter through.
The warning came during a webinar hosted by audit and advisory firm Crowe, where participants highlighted the growing crisis facing UK automotive.
‘Worse than COVID-19’ for many suppliers
One contributor described the situation as more damaging than the pandemic: “Nobody outside of the automotive industry understands how bad this is.”
Johnathan Dudley, Head of Manufacturing and SME Corporates at Crowe, said speed was critical if small suppliers were to survive: “It is absolutely vital that the money starts to filter down the chain – and quickly. The depth of penetration of the loan funding is an issue. Will it trickle down the supply chain and across ancillary businesses fast enough, wide enough and far enough before companies run out of cash?”
He warned that Tier 1 suppliers and JLR itself are unlikely to place fresh orders until they have exhausted existing stocks built up during plant shutdowns — delaying the point at which smaller firms further down the chain receive payments.
In the meantime, SME suppliers face mounting bills. Rent, mortgages, wages and payments to their own suppliers cannot wait for funding flows to improve.
Some business leaders said that, after COVID-19, directors are now far more reluctant to provide personal guarantees to secure loans or overdraft extensions, adding another layer of risk for smaller firms.
Dudley emphasised the need for additional measures: “There is an immediate need for stress emergency funding and support 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.”
Participants also expressed concern that funds could stall at Tier 1 suppliers rather than filtering through to smaller businesses, leaving many SMEs without the liquidity needed to survive.
With the UK automotive sector already under strain from global supply disruptions, rising costs and weaker demand, industry voices argue that ensuring cash reaches SMEs quickly is vital to protecting jobs and preserving critical supply chains.
