MG Rover collapse cost the country £600 million pounds, says PAC

MG Rover collapse cost the country £600 million pounds, says PAC

	Published : Tue, 25 Jul 2006 13:35 By : Andrew Stead Print this Story

LONDON: The collapse of U.K. carmaker MG Rover could cost the private sector and former employees more than 600 million pounds, according to an official report. The parliament's public accounts committee said in the report the figure includes a loan extended by the government, which would have to be written off, and 500 million pounds in pension fund deficit.

The pension deficit will now have to be met by the business-financed Pension Protection Fund. In addition, over 100 million pounds are payable to U.K.-based trade creditors, while its collapse cost taxpayers an estimated 270 million pounds from 2000 to 2005. Some 2,000 people, who were among the 6,000 people working at the company's Longbridge factory, are still jobless.

The committee, which carried out a study of the events that led to the collapse of the company, found that the department of trade and industry lacked any comprehensive plan to deal with the situation.

MG Rover was placed under administration in April 2005. The company had been in talks with Chinese automaker Shanghai Automotive Industry Corp over a possible tie-up and in the week before it collapsed, the department of trade and industry had provided it a loan of 6.5 million pounds of public money hoping the deal would be struck. The loan had led to accusations that it was politically motivated with an eye on the elections.

The committee chairman Edward Leigh said the department had been in a difficult situation. "In some respects it rose to the occasion -- for instance by arranging immediate support for former MG Rover employees. But serious gaps in its planning were exposed.

"The truth is that it had never managed to get close enough to the company to develop comprehensive plans for this kind of scenario and found itself trying to catch up with a rapid developing situation."

The report said 5.2 million pounds of the loan would have to be written off.

The report praised the work carried out by local agencies in helping the economy of the region to diversify and become less dependent on the carmaker.

The company's assets have been bought by China's Nanjing Automobile Group Corp. for about $97 million. The Chinese company said it will invest at least 10 million pounds initially in the Longbridge plant and restart production of MGF sports car soon.