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Rapid financial support to provide urgent liquidity to manufacturing companies via a Debt Equity-Swap option

Jack Harris and Jim McConalogue, March 2021

An informational briefing by Jack Harris and Jim McConalogue proposes that for the purposes of supporting the UK’s economic recovery from Covid-19, a Government-backed equity fund should be established to provide manufacturers with the capital required to restructure and grow competitively back into production.

The report finds, “The overwhelming bulk of manufacturing jobs in the UK are in the supply-chain, which is typically populated by a large and somewhat diffuse network of small and medium-sized enterprises (SMEs) and mid-caps. To be successful post-Covid-19 businesses, these companies have two essential needs: vibrant and vital prime contractors from whom they receive demand, and sufficient liquidity to re-start after an extended lockdown.”

In return for a minority stake in the business, a Debt-Equity Swap model could inject much-needed patient capital at a time when no other affordable borrowing instruments are available.

It would protect critical supply-chain businesses and jobs and would be of immense utility to the high-value manufacturing sector, helping to overcome the challenges faced due to long investment cycles.

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