How the UK can safeguard its domestic auto sector

SMMT’s annual International Automotive Summit always seems to take place at politically ‘interesting’ times. At the height of tariff threats last year; during a General Election two years ago; just after the Brexit referendum a decade ago. This year’s event was no different, with a new Prime Minister on the way and urgent threats facing the UK automotive sector.

Our latest automotive competitiveness assessment, one year on from the launch of the UK’s Modern Industrial Strategy, recognises progress. DRIVE35, the British Industrial Competitiveness Scheme (BICS), new trade agreements, EV grants and self-driving legislation are all important steps. But the report is also a blueprint for the next Prime Minister: delivery must accelerate and policy must align behind growth, investment and competitiveness.

One challenge in particular is in government’s immediate gift to solve – the ZEV Mandate. Every respondent to our second Automotive Business Leaders Survey, representing more than 98% of Britain’s vehicle manufacturing and encompassing the supply chain and wider sector, believes the UK is behind the 2030 ambition – and almost three-quarters significantly so. By forcing billions more pounds in manufacturer discounts, the regulation is positioning Britain as an expensive place to sell – and a less attractive place for global investors, including reinvestment, as industry transitions to EVs.

Industry and government can ill afford a belated resolution. Business Secretary Peter Kyle MP’s support for a timely review of the regulation at Summit was therefore welcome, as was his acknowledgement that getting the transition wrong risks causing “untold damage” for UK Automotive. Losses are already mounting and are only compounded by rising business inputs – particularly energy, requiring measures beyond BICS alone.

Automotive leaders also remain gravely concerned by the EU’s protectionist ‘Made in Europe’ proposals, with more than four in five respondents stating their UK operations would be hit if the plan proceeds unchanged. A desire to safeguard domestic industry is understandable but undermining the UK-EU partnership – each other’s biggest automotive export markets, sharing trade worth €39.7 billion annually – would cause lasting damage to both sides. That damage would be amplified if tougher TCA rules of origin take effect in just six months, triggering tariffs worth £1.4 billion next year alone.

ACEA’s position published this week rightly underscores the strategic and economic necessity of including the UK in any future ‘Made in Europe’ definition, and we urge all parties to reflect on this position which is aligned both to the European Suppliers Association (CLEPA) and SMMT, representing consensus across the industry.

Closer partnership is central to solving many of the sector’s challenges. After a successful Summit, I would like to thank SMMT’s event partners – Auto Trader, DP World, Freightliner, Marsh, NTT DATA, Pinsent Masons and Shoosmiths – for their support in stimulating fresh discussion across industry, politics and media at this pivotal moment.