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COM (79)381
V ol.1979/0136

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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GeneralSecretariat \COM(79)381final
Brussels,16thJuly1979
FOROFFICIAL USEONLY
REQUESTFORASSENT,PURSUANT TOARTICLE56.2aOFTHE
ECSCTREATYTOGRANTING ARECONVERSION LOANTO
"FINANCEFORINDUSTRYLIMITED"(FFI),UNITEDKINGDOM
(Communication fromtheCommission totheCouncil)
COM(79)381final

COMMISSION
OFTHE
EUROPEAN COMMUNITIES INTERNAL DOCUMENT
»
COMMUNICATION TOTHECOUNCIL
Subject:Requestforassent,pursuanttoArticle56.2aoftheECSC
Treatytograntingareconversion loantoFinancefor
IndustryLimited(FFI),UnitedKingdom.
I.ESSENTIAL INFORMATION
Applicant
Beneficiary
Project
Location
Globalamountofinvestment
Globalloanrequested
Jobscreated
Interestreduction:FinanceforIndustryLimited(FFI)
:Variousundertakings
:Creationandexpansionofsmalland
mediumsizedindustrialactivities
:AllareasintheUKwhichareaffected
bytherun-downincoalandsteel
:Atleastb40,000,000 <+62,339,087 EUA)
:t20,000,000 (+31,169,543 EUA)
:Atleast1.558jobssuitableforformer
ECSC-workers .
:935,086EUAperyearforthefirstfive
years(3%pointsayearonaloanof
31,169,543 EUA).
II.CONFORMITY WITHARTICLE56OFTHEECSCTREATY
TheUKRegionalDevelopment Programmes,intheadditional Annex6B,provided
totheCommissioninSeptember/October1978,gavethefollowingdetailsonthe
structure,employmentsituation andfutureprospectsofthecoalandsteel
industryintheUK.
1.Coal
Structureof_the_Industry
ThenumberofminesbeingworkedbytheNationalCoalBoardhasdeclined
from958in1947,atthetimeofnationalisation ,to231attheendof

March1978.Themajorcoalfields areinScotland,theNorthEastofEngland
<Northumberland andDurham),theCentralcoalfield(Yorkshire,Nottingham-
shireandDerbyshire )andSouthWales.Therearesmallercoalfields in
Merseyside,Staffordshire ,Leicestershire ,Warwickshire andKent.
Employment
AttheendofMarch1978thecoalindustryemployed292.600people.
239.300ofthesewereemployedatcoalmines,whichmarksadeclinefrom
afigureof711.500in1953.Thefollowingtableshowsthechangesin
manpoweremployedatminesoverthelastfouryears:
March1975:248800
March1976:243700
March1977:242100
March1978:239300.
Thisdeclinehasbeencausedbytheclosureofcollieries whichhaveceased
tobeeconomic,andbytheincreaseinproductivity broughtaboutby
mechanization .
ThegeneralstrategyoftheNCBisbasedontheimplementation of"Plan
forCoal"aprogrammedrawnupfollowingtheworldoilcrisisof1973.
Itprovidesareassessment ofcompetitiveness ofthecoalindustryina
worldinwhichthecheapenergysuppliesofthe1950sand1960swillno
longerbeavailable.Undertheplantherewillbea10yearinvestment
programme,costingsomeUKL4300millionatMarch1978prices,butthe
newjobsthiswillcreatewillbeoffsetbythetrendtowardsclossure
ofolderminesandtheexpectedincreaseinoutputperman,causedby
newmethodsandmachines.
Steel
Althoughsteelisanationalized industry,theBritishSteelCorporation
(BSC)doesnotcovertheentireindustry.BSCsupplied54,8%oftheUKmarket
forfinishedsteelinthefinancialyear1977/78;24,8%wassuppliedby
theUKprivatesectorsteelproducers and20,4%byimports.
Employment
a)FiguresforBSCemployment overthelast5yearsshowasteadydecline
intheworkforceinvoLvedinironandsteelactivities,thefallbeing
particularly heavyinWales,Scotland,theNorthernandNorthWestern
regions.ThenumberofthoseemployedbyBSCinironandsteelactivities
hadfallenfrom201.420inSeptember 1972to164.500byMarch1978.
b)Privatesectoremploymentisaround80.000.Whilsttherehasbeenno
dramaticoverallfallinthelastfewyears,therehavebeenredundancies
andmanymorecompanieshavereducedtheirworkforcebynaturalwastage,

3.
reflecting both modernisation and continuing depressed market conditions .
TheBritish Independent Steel Producers Association claim that employment
inspecial steels hastfallen by3.500 since 1975 .
Importance toAssi sted Areas
Almost all BSC'ssteelworks are inassisted areas .The only steelworks
outside these areas are atBilston ,Corby and Shelton .Some hundreds
ofjobs are lost atShelton asaresult ofmodernisation ,Bilston and
Corby are under discussion for closure resp .partial closure .
Theprivate companies are concentrated inthree areas -Sheffield (Inter­
mediate Area),the centre ofspecial steel production ,the West Midlands ,
where many ofthe re-rolling companies are based and South Wales (Special
Development Area),where there are some ofthe largest private sector
electric arc plants .
The Government 'spolicy towards the industry was outlined inaWhite Paper
"BSC the road toviability "(Cmnd 7149),published inMarch 1978 .This
stated that itwould befor BSC tobegin negotiations ,attheir discretion
inrespect ofclosures at"high cost "steelworks ,with the TUC Steel
Committees and local workforces .This,together with the need toraise
output per man inBSC,suggests that the future trend inemployment in
the industry will bedownwards .
Most private companies have avoided loss during the steel recession by
cutting back onthe level ofoperations ,reducing manning and insome
cases relying ondownstream activities .Few companies are prepared to
embark onmajor schemes under present market conditions ,and there is\
evidence tosuggest that the pressure toreduce the workforce is
increasing ,asdemand shows nosign ofrecovery .
The proposed loan facility toFFI which istobemanaged byitsoperating sub­
sidiary ^,ICFC,isasuccessor ofthefirst global loan granted bythe
Community toFinance for Industry Ltd.Although thefirst global loan
facility wasestablished in1975,most oftheindividual sub-loans have been
approved in1978 and 1979 .The reasons forthis have been :Availability
ofsterling and some uncertainty surrounding the exact definition of
eligible areas and operating principles ofthefacility .
These difficulties have now been overcome and the loan facility issuccessful ,
b7,754,000 ofthe b10,000,000 were approved for 35projects creating
about 1.700 new jobs intotal .Inview ofthe number ofprojects currently
under consideration the balance ofb2,246,000 islikely tobeutilised
before the loan expires .
Finance for Industry isowned bythe Bank ofEngland and the London
and Scottish clearing banks .Itisnot government controlled ,nor does it
use government funds .Through its subsidiary ICFC,ithelps small and medium
size companies togrow byproviding them with finance for expansion and
development .Since its formation in1945 ICFC has provided over b450 million
-inamounts ranging from b5,000 tob2million -tomore than 4.000
companies inthe United Kingdom .There are 18area offices throughout
Britain ,tobring ICFC 'sfacilities tothe business man'sdoorstep .Each
office isstaffed bypeople with asound knowledge oflocal industry and
oeamerce andtheir operating environment .
■■■/•••

4.
III.THE PROJECT
The Commission will make xt20 m<+31»17 mEUA)available toFFIfor
three years .The funds Will bepaid toFFI inseveral tranches in
accordance with sub-loans approved foreligible undertakings .The
intermediary agency will submit each project tothe Commission for
approval .
The decision relating toindividual sub-loans will betaken inaccordance
with thecriteria and objectives published bythe Commission (O.J. C178/2
of27July 1977,O.J. C82/8of29March 1979 )taking account ofthe number
ofjobs created and suitable for ex-ECSC workers inrelation tothe size of
the loan envisaged and ofthe amount tobeinvested infixed capital .
The interest rate fixed for each tranche ofthe global loan will beapplied
tothe sub-loan ;aninterest rebate will begranted .
 
The Commission 'scontribution will normally not exceed 50% ofthe fixed
investment cost .This contributes tothe special credit needs ofsmall and
medium sized enterprises ,which often find itmore difficult toborrow
onthecapital markets than larger enterprises ,and inwhich investment ,
calculated asanamount per job created ,isoften lower than inlarger
enterprises .
FFIwill report tothe Commission atsix-monthly intervals onthe way in
which the global loan has been used ;itwill report annually onthe re­
employment ofex-ECSC workers inenterprises financed from this global loan .
IV.EFFECT OF THE LOAN ON THE CREATION OF NEW JOBS IN COAL AND STEEL AREAS
Itisenvisaged that the individual projects which benefit from aid
will permit the creation ,between 1979 and 1982,ofatleast 1.558 new
jobs suitable for ex-ECSC workers inareas affected bythe run-down in
coal and steel .
V . CONCLUSION
The commission considers that the application complies with the conditions of
Article 56.2a,ofthe ECSC Treaty .Inconsequence ithas authorised the grant
ofaglobal loan oft20,000,000 (about 31,169,543 EUA)oranequivalent
amount toFFI.Interest istobereduced by935,086 EUA per year for the
first five years .
The Commission invites the Council togive its assent tothis decision
and toitsextension bythe same amount ifsuch extension proves soon necessary .
*