The UK's auto industry trade association, the SMMT, has launched what it calls the 'Safe Harbour Scheme' to prevent insolvencies and save jobs across auto sector as it grapples with the effects of the coronavirus crisis.

The SMMT says the new initiative allows multiple companies to come together to support critical suppliers without falling foul of anti-competition rules.

Given the integrated nature of automotive supply chains and reliance on just-in-time manufacturing techniques, if one link in a chain hits trouble it can undermine all the companies involved, including vehicle manufacturers, threatening an entire sector. The Safe Harbour scheme seeks to provide a legally compliant structure through which collaborative solutions can be found to support companies at risk and the entire production supply chain safeguarded.

The Safe Harbour process begins with a confidential conversation between a company experiencing difficulties and SMMT to determine if they want to proceed, and there is no obligation to do so. For businesses deciding to enter Safe Harbour, SMMT facilitates engagement with all relevant stakeholders and an Independent Third Party (ITP) to identify and implement measures to ensure business continuity. These need agreement from all parties and could include steps such as temporary improved payment terms and/or financial support or a new partnership or investment opportunities.

The Safe Harbour Scheme and framework has been developed by SMMT with support from major manufacturers, the Automotive Council and Department for Business, Energy and Industrial Strategy (BEIS), alongside ITP partners Deloitte, Grant Thornton, KPMG and RSM. The scheme operates within competition compliance requirements set out in UK and EU regulations. It is available to any company operating in the UK automotive sector.

Mike Hawes, SMMT Chief Executive, said: "With the UK automotive sector badly hit by the coronavirus crisis, thousands of jobs already lost and barely weeks left until a fundamental change of trading conditions with our largest market, the EU, the pressures on automotive businesses are immense. Inevitably, these pressures are going to take their toll on businesses, so the Safe Harbour Scheme has been created to help any suppliers in trouble. It should provide valuable breathing space as the sector restarts and business and consumer confidence recovers. Ultimately, however, the industry must maintain its competitiveness to grow and for that we still look to the government to deliver an ambitious trade deal with the EU."

More details of scheme at SMMT website