HC Deb 18 July 1985 vol 83 cc204-5W
Mr. Howard

asked the Secretary of State for Trade and Industry if he will make a statement on the Government's review of the exchange risk guarantee scheme.

Mr. Norman Lamont

On 29 March, I announced that the review was nearly complete. The Government have now decided, in view of the increase in the scheme's costs in recent years, the unpredictability of future liabilities, and the availability of other sources of finance, that the scheme should be targeted more cost-effectively in line with the Government's regional policy objectives. The following arrangements take effect from today, subject to suitable transitional provisions.

  1. (a) Exchange risk cover will no longer be available on loans provided by the European Investment Bank (EIB);
  2. (b) Exchange risk cover for loans from the European Coal and Steel Community (ECSC) will be limited to a maximum of £500,000 or each supported project;
  3. (c) The sterling interest rate for ECSC finance enjoying cover will be increased from 3 per cent. below the broadly commercial rate (as used under the Industrial Development Act 1982) to 2 per cent. below the broadly commercial rate, subject to charging a minimum premium of 1 per cent.

It sould be remembered that companies dealing with the EIB and ECSC are creditworthy enterprises, often backed by third party guarantees, who can generally raise finance on the commercial money markets. In addition, the Government's regional selective assistance grants are available to worthwhile projects in the assisted areas that require assistance to enable them to proceed.

As well as taking advantage of the Government's facilities, it is opeen to United Kingdom firms to seek EIB and ECSC loan finance in sterling, thus avoiding contingent liabilities for possible exchange losses. Alternatively, they can if they wish seek foreign currency loans with or without measures to reduce exposure to risk. I hope that United Kingdom companies will take full advantage of these European opportunities, within the limits of what is available.

The Government will be prepared to provide cover under the terms of the previous scheme to eligible cases submitted to it before the date of this announcement, and will discuss suitable transitional arrangements with the scheme's agents in respect of their cases.