UK auto industry calls for dedicated restart package to save jobs and pave the way for recovery

Jun 24, 2020   OEM

The harsh reality of the Covid crisis for the UK’s £18.6 billion ($22.88 billion) automotive sector is laid bare by a new member survey from the Society of Motor Manufacturers and Traders (SMMT) revealing that up to one in six jobs are at risk of redundancy. With a third of automotive workers still furloughed, the end of the government’s job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs.

More than 6,000 UK automotive job cuts have been announced in June, a result of global lockdowns, closed markets and shuttered plants. Showrooms in England and Wales are now re-opening and production lines restarting, but reduced demand and social distancing are slowing productivity.

 

SMMT is calling on government to address this with a support package for the entire sector to help drive demand and ease cash flow. Measures including unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence would accelerate a sustainable restart for the market and manufacturing – a pre-requisite to the recovery phase, and to unlocking the investment needed to drive a green future for the UK.

 

Mike Hawes, SMMT Chief Executive, said, “UK Automotive is fundamentally strong. However, the prolonged shutdown has squeezed liquidity and the pressures are becoming more acute as expenditure resumes before invoices are paid. A third of our workforce remains furloughed, and we want those staff coming back to work, not into redundancy.”

 

“Government’s intervention has been unprecedented. But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart; to build demand, volumes and growth, and keep the UK at the forefront of the global automotive industry to drive long-term investment, innovation and economic growth. Support delivered now is an investment in the future of one of Britain’s most valuable assets… investment that we will repay many times over,” he added.

 

The pending jobs crisis is amplified by the prospect of a ‘bare bones’ or no-deal Brexit so an injection of fresh momentum into free-trade agreement talks is welcome. Certainty that a full, zero-tariff deal will be in place by the end of the transition period will give businesses on both sides chance to prepare, and help drive investment into the new skills, facilities and technologies that will be integral to delivering a zero-carbon future for the UK.

 

Mike Hawes said, “Covid has consumed every inch of capability and capacity and the industry has not the resource, the time nor the clarity to prepare for a further shock of a hard Brexit. That’s why we do need to ‘turbo charge’ the negotiations to secure a comprehensive Free Trade Agreement with the EU that maintains tariff and quota free trade… With such a deal, a strong recovery is possible, we can safeguard the industry and our reputation as an attractive destination for foreign investment and a major trade player.”

 

The impact of the pandemic on manufacturing is expected to cut annual car and light commercial vehicle production volumes by a third to just 920,000 units this year. With an ambitious, tariff-free FTA in place, full recovery is expected to take up to five years, with output reaching pre-crisis levels of 1.35 million units by 2025.2 

 

However, a ‘no deal’ scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 – the lowest level since 1953. This would mean a £40 billion ($50 billion) cut in revenues, on top of the £33.5 billion ($41.88 billion) cost of Covid-19 production losses over the period.

 

Automotive is one of the UK’s most valuable economic assets, exporting more goods than any other sector, generating billions for the economy and supporting some 168,000 high-skilled and high-paid manufacturing jobs in communities across every nation and region of the UK.

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