CEO Update

High energy prices threaten to stall UK Automotive

01 July 2022 #CEO Update

From Covid impacts to component shortages, supply chain disruption to trade uncertainty, and regulatory change to rising inflation, the challenges the sector faces are immense. The pressures are compounded by the UK’s high energy costs and new analysis from SMMT this week revealed how the automotive industry faces a £90 million uplift in energy bills this year – equivalent to more than 2,500 automotive jobs – as costs surge by 50%.

UK electricity prices are already the most expensive of any European automotive manufacturing country and 59% higher than the EU average, meaning that last year, UK manufacturers could have saved almost £50 million on energy costs if they were buying in the EU rather than the UK.

This is why addressing the UK’s high energy costs is the industry’s number one priority. Action to alleviate energy costs now will help keep us competitive and be a windfall for the sector, stimulating investment in innovation, R&D, training – all reinvested in the UK economy.

But there are many other factors to competitiveness and our new report, From Full Throttle to Full Charge, presented for the first time at SMMT’s International Automotive Summit on Tuesday, sets out how industry and government can work together to build a UK automotive ecosystem fit for a zero emission future.

This includes five crucial asks for the industry including: support businesses with measures to help address high energy costs; expand the Automotive Transformation Fund and allocate the full £1bn of funding; develop a generous successor scheme to super deductions and enhance R&D tax credits to drive investments; fully implement the EU-UK TCA and prioritise UK Automotive in trade policy; and focus support on current and future skills.

If there is the will, the effort and the action from government, they will find it matched by that of the UK industry in investment and competitiveness.

This is needed now more than ever, with production of cars and engines having suffered in recent months due to the aforementioned plethora of challenges. However, this week brought some rare positive news with May manufacturing figures showing a return to growth after months of decline. Cars and engine production grew by 13.3% and 12.3% respectively. LCVs, on the other hand, have fared better this year and, indeed, continued their growth in May, up by 26.5%.

Long-term recovery, however, will be gradual as supply chain deliveries remain erratic, business costs volatile and geopolitical instability still very real. With the industry racing to decarbonise, we need to safeguard manufacturing competitiveness, drive investment and develop the skill base.

Finally, I would like to take this opportunity to thank all of our speakers, supporters and partners of SMMT’s International Automotive Summit, including Akeneo, Auto Trader, Data Interchange, Ecobat Solutions, EY, Pinsent Masons, Rockwell Automation and Shell Recharge Solutions, as well as SMMT staff, without whom the event would not have been possible.


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