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UK car industry under threat with one in six jobs at risk, warns SMMT

Mark Moran
23 June 2020
Source: SMMT
Source: SMMT

The UK car industry could see massive job losses without further government support, the Society of Motor Manufacturers and Traders (SMMT).

The organisation wants the government to provide more support to kickstart production, including measures such as emergency funding, permanent short-time working, business rate holidays and VAT cuts.

SMMT has reported that one in six jobs in the automotive sector are at risk of redundancy as a result of the COVID-19 crisis and subsequent lockdown.

More than 6,000 jobs in the car industry have been lost so far this month, with manufacturers affected by ongoing overheads such as rent alongside a drop in demand.

With a third of automotive workers still furloughed, the SMMT said end of the government’s job retention lifeline in November highlights the critical need for a dedicated restart support package to safeguard these jobs.

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.

Speaking at the industry’s virtual International Automotive Summit SMMT Chief Executive Mike Hawes 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, an investment that we will repay many times over.”

The SMMT said the pending jobs crisis will be amplified by the prospect of a ‘bare bones’ or ‘no-deal’ Brexit. The automotive sector wants to see a full, zero-tariff deal will be in place by the end of the transition period.

“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 (FTA) 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.”

SMMT has published its second Annual Trade Report for 2020, UK Automotive Trade in a post-COVID World. It features new figures highlighting the risk a no-deal Brexit would pose to the UK’s status as the world’s 10th largest exporter of goods.

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. SMMT argues that with a 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. 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 £40bn cut in revenues, on top of the £33.5bn cost of COVID-19 production losses over the period.

SMMT said the automotive sector exports more goods than any other sector, generating billions for the economy and supporting some 168,000 high-skilled and high-paid manufacturing jobs across the UK.

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