By Robert Hutton and Mark Deen
Jan. 14 (Bloomberg) -- Business Secretary Peter Mandelson said the U.K. government will guarantee as much as 20 billion pounds ($29 billion) of bank loans to medium-sized companies in order to keep credit flowing during the recession.
Companies with sales of up to 500 million pounds qualify for the support. A second tranche of 1.3 billion pounds is set aside for firms with sales of 25 million pounds or less, the Department of Business said in a statement in London today.
Prime Minister Gordon Brown’s government is stepping up efforts to limit fallout from the global credit crunch after a 50 billion pound bank recapitalization program failed to stop the loan rationing. In October, the government also extended 250 billion pounds of credit lines to banks. A month later, it offered voters 20 billion pound package of mostly tax cuts.
“We know that some companies are struggling to secure the finance they need,” Mandelson said in the statement. “U.K. companies are the lifeblood of the economy, and it is crucial that government acts now to provide real help.”
Companies including Woolworths Group Plc and MFI Retail Ltd. have tipped into bankruptcy as credit dried up, and business lobby groups have said Brown must act quickly to prevent the recession from deepening. Britain’s economy shrank in the third quarter for the first time in almost two decades.
The U.K. is similar to one German Chancellor Angela Merkel approved earlier this week, channelling 100 billion euros ($135 billion) to help support business.
To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.netMark Deen in London at markdeen@bloomberg.net
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