CEO Update

Why dedicated support for auto sector is now critical

10 July 2020 #CEO Update

The automotive sector has been particularly hard hit by the coronavirus crisis, with thousands of job losses already announced and many more at risk. So it’s bitterly disappointing that the Chancellor this week stopped short of supporting the restart of one of the UK’s most important employers and a driver of growth – not just locally, but across every region of the country.

The UK now stands alone as the only country of Europe’s five biggest economies not to provide dedicated support for its automotive industry, a situation that will only deter future investment. The German government, by comparison, has proposed a €5 billion package of incentives, whilst the French government has unveiled an even larger €8 billion plan. The effect on the market has been significant with French new car sales actually up 1.2% in June despite a similar Covid-19 impact.

We urgently need government to expand its strategy and introduce sector-specific measures, including those that SMMT has been calling for repeatedly over the last three months. Action to improve cash flow such as business rate holidays and tax cuts is now critical.

The industry is already facing its biggest challenge in living memory and until critical industries such as automotive recover, the UK’s economic recovery will be stuck in low gear. The scale of this challenge was highlighted this week with the release of the UK’s new car registration figures for June.

Whilst dealerships began to reopen in England and Northern Ireland after two months of lockdown, uncertain economic confidence and the delayed re-opening of Welsh and Scottish showrooms led to a -34.9% year-on-year decline, with 78,044 fewer registrations than in June 2019.

Many of the vehicles registered were those ordered pre-lockdown, suggesting the level of pent-up demand may not be as high as first hoped. Year to date registrations are now down -48.5%, representing the lowest level since 1971 and resulting in an estimated £1.1 billion loss to the Treasury in VAT receipts alone.

This is clear evidence as to why we need policies that provide broader support for consumer confidence to boost big-ticket spending, which in turn will help drive manufacturing.

Finally, I leave you with the news that SMMT’s 15th Covid-19 support webinar will be hosted on Tuesday 14 July at 15:00. Representatives from PwC will be explaining the results of their European supply chain survey. You can sign up here.